<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
DEFIANCE, INC.
(NAME OF SUBJECT COMPANY (ISSUER))
DN ACQUISITION CORPORATION
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
THE GENERAL CHEMICAL GROUP INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $0.05 PER SHARE
(TITLE OF CLASS OF SECURITIES)
244662-10-2
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
TODD M. DUCHENE, SECRETARY
DN ACQUISITION CORPORATION
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(603) 926-5911
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
COPY TO:
RALPH ARDITI, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 909-6000
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$61,223,348.50 $12,244.67
</TABLE>
* Based on the offer to purchase all of the outstanding shares of common stock,
par value $0.05 per share (the shares of common stock hereinafter being
referred to as the "Shares"), of the Subject Company at $9.50 net per share.
Based on information provided by Defiance, Inc., the number of Shares
outstanding as of January 7, 1999 is assumed to be 6,003,749 and the number
of options to purchase Shares outstanding as of January 7, 1999 is assumed to
be 440,814.
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid:
---------------------------------
Form or Registration No.:
---------------------------------
Filing Party:
---------------------------------------------
Date Filed:
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CUSIP NO. 244662-10-2
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1. NAME OF REPORTING PERSON:
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NEW HAMPSHIRE OAK, INC.
I.R.S. IDENTIFICATION NO. 02-0415400
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A) [ ]
(B) [ ]
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3. SEC USE ONLY
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4. SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF, BK
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(E) OR 2(F)
[ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,046,587 SHARES*
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES (SEE INSTRUCTIONS)
[ ]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
16.2%*
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10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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</TABLE>
* See footnote on following page.
2
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1. NAME OF REPORTING PERSON:
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DN ACQUISITION CORPORATION
I.R.S. IDENTIFICATION NO. None.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A) [ ]
(B) [ ]
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3. SEC USE ONLY
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4. SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF, BK
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(E) OR 2(F)
[ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,046,587 SHARES*
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES (SEE INSTRUCTIONS)
[ ]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
16.2%*
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10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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</TABLE>
* On January 7, 1999, DN Acquisition Corporation (the "Purchaser") and New
Hampshire Oak, Inc. ("Parent"), entered into a Stockholders Agreement with
each of Jerry A. Cooper, Thomas H. Roulston II, Scott D. Roulston, Michael J.
Meier, John D. Ong, George H. Lewis III, James E. Heighway, Richard W. Lock,
Clifford Schumacher, James L. Treece, Carl A. Rispoli, Fred Burke, Roger
Drummer, Michael Madden, Michael Pavlica, David Piacenti, Benjamin Scherschel,
Janice Schneikart and Phillip Tomczak (collectively, the "Selling
Stockholders"), pursuant to which such Selling Stockholders have agreed with
the Purchaser and Parent to tender to the Purchaser pursuant to the Offer (as
hereinafter defined) all of the Shares (including Shares underlying options
issued to such Selling Stockholders) owned beneficially and of record by them
and have granted to the Purchaser an irrevocable option, exercisable upon the
occurrence of certain trigger events, to purchase all of the Shares (including
Shares underlying options issued to such Selling Stockholders) owned
beneficially and of record by them in each case at a price of $9.50 per Share
(representing an aggregate of 1,046,587 Shares, or approximately 16.2% of the
Shares outstanding on a fully diluted basis (such basis assumes all Shares
underlying vested and unvested stock options are issued and outstanding) as of
January 7, 1999). The Purchaser's right to purchase the Shares subject to the
Stockholders Agreement is reflected in Rows 7 and 9 of each of the tables
above. The Stockholders Agreement is described more fully in Section 12 ("The
Merger Agreement; The Stockholders Agreement") of the Offer to Purchase (as
hereinafter defined).
3
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1. NAME OF REPORTING PERSON:
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THE GENERAL CHEMICAL GROUP INC.
I.R.S. IDENTIFICATION NO. 02-0423437
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A) [ ]
(B) [ ]
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3. SEC USE ONLY
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4. SOURCES OF FUNDS (SEE INSTRUCTIONS)
BK
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(E) OR 2(F)
[ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,046,587 SHARES*
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES (SEE INSTRUCTIONS)
[ ]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
16.2%*
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10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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</TABLE>
* See footnote on page 3. Parent is a wholly-owned direct subsidiary of The
General Chemical Group Inc.
4
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This Tender Offer Statement on Schedule 14D-1 relates to the offer by DN
Acquisition Corporation, a Delaware corporation (the "Purchaser"), a direct
wholly-owned subsidiary of New Hampshire Oak, Inc., a Delaware corporation
("Parent"), a direct wholly-owned subsidiary of The General Chemical Group Inc.,
a Delaware corporation ("General Chemical Group"), to purchase all of the issued
and outstanding shares of common stock, par value $0.05 per share (all of the
shares of common stock being hereinafter collectively referred to as the
"Shares") of Defiance, Inc., a Delaware corporation (the "Company"), at a price
of not less than $9.50 per Share net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated January 7,
1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with the Offer to Purchase and any supplements thereto, collectively
constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and
(a)(2), respectively. This Statement also constitutes a Statement on Schedule
13D with respect to the acquisition by Parent and the Purchaser of beneficial
ownership of the Shares subject to a Stockholders Agreement dated January 7,
1999 among Parent, the Purchaser and the stockholders of the Company listed on
Schedule A thereto. The item numbers and responses thereto below are in
accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Defiance, Inc. The principal
executive offices of the Company are located at 1111 Chester Avenue, Suite 750,
Cleveland, Ohio 44114-3516.
(b) The exact title of the class of equity securities being sought in the
Offer is common stock, par value $0.05 per share of the Company. Information
regarding the number of Shares outstanding, the amount of Shares being sought
and the consideration being offered therefor is set forth in the Introduction
(the "Introduction") of the Offer to Purchase and is incorporated herein by
reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each quarterly period
during the past two years is set forth in Section 6 ("Price Range of the
Shares") of the Offer to Purchase and is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) and (g) This Statement is filed by the Purchaser, Parent and
General Chemical Group. The information concerning the name, the state of its
organization, its principal business and address of the principal office of each
of the Purchaser, Parent and General Chemical Group, and the information
regarding the name, business address, present principal occupation or employment
and the name, principal business and address of any corporation or other
organization in which such employment or occupation is conducted, material
occupations, positions, offices or employments during the last five years and
the citizenship of each of the executive officers and directors of the
Purchaser, Parent and General Chemical Group Inc. is set forth in Section 9
("Certain Information Concerning the Purchaser, Parent and General Chemical
Group") of the Offer to Purchase and in Schedule I thereto and is incorporated
herein by reference.
(e) and (f) During the last five years, none of the Purchaser, Parent or
General Chemical Group nor, to the best knowledge of the Purchaser, Parent or
General Chemical Group, any of the persons listed in Schedule I to the Offer to
Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) The information set forth in Section 9 ("Certain Information Concerning
the Purchaser, Parent and General Chemical Group") of the Offer to Purchase is
incorporated herein by reference. Except as set forth in Section 9 of the Offer
to Purchase, since June 30, 1995, there have been no transactions which would be
required to be disclosed under this Item 3(a) between either the Purchaser,
Parent or General Chemical Group or, to the
5
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best knowledge of the Purchaser, Parent and General Chemical Group, any of the
persons listed in Schedule I to the Offer to Purchase and the Company or any of
its executive officers, directors or affiliates.
(b) The information set forth in Section 9 ("Certain Information Concerning
the Purchaser, Parent and General Chemical Group") and Section 11 ("Contacts and
Transactions with the Company; Background of the Offer") of the Offer to
Purchase is incorporated herein by reference. Except as set forth in Section 9
and Section 11 of the Offer to Purchase, since June 30, 1995, there have been no
contacts, negotiations or transactions which would be required to be disclosed
under this Item 3(b) between either the Purchaser, Parent or General Chemical
Group or any of their respective subsidiaries or, to the best knowledge of the
Purchaser, Parent and General Chemical Group, any of those persons listed in
Schedule I to the Offer to Purchase and the Company or its affiliates concerning
a merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(g) The information set forth in the Introduction, Section 7 ("Purpose
of the Offer; Plans for the Company; Effect of the Offer on the Market for the
Shares; Stock Quotation; Exchange Act Registration; Margin Regulations"),
Section 11 ("Contacts and Transactions with the Company; Background of the
Offer"), Section 12 ("The Merger Agreement; The Stockholders Agreement") and
Section 13 ("Dividends and Distributions") of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser, Parent and General Chemical Group") and
Section 11 ("Contacts and Transactions with the Company; Background of the
Offer") of, and Schedule I to, the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser, Parent and General Chemical Group") and
Section 11 ("Contacts and Transactions with the Company; Background of the
Offer") of, and Schedule I to, the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser, Parent and General Chemical Group"),
Section 11 ("Contacts and Transactions with the Company; Background of the
Offer"), Section 10 ("Source and Amount of Funds"), Section 12 ("The Merger
Agreement; The Stockholders Agreement") and Section 16 ("Fees and Expenses") of
the Offer to Purchase is incorporated herein by reference. Except as set forth
in the Introduction and Sections 9, 10, 11, 12 and 16 of the Offer to Purchase,
none of the Purchaser, Parent or General Chemical Group, nor, to the best
knowledge of the Purchaser, Parent or General Chemical Group, any of the persons
listed in Schedule I to the Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loans or option arrangements, puts or
calls, guarantees of loans, guarantee agreements or any giving or withholding of
proxies).
6
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ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser, Parent and General Chemical Group") of the Offer to Purchase,
including the financial statements and related notes thereto incorporated by
reference in Section 9, is incorporated herein by reference.
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a shareholder of the Company whether to sell, tender or hold
Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth in the Introduction, in Section 9 ("Certain
Information Concerning the Purchaser, Parent and General Chemical Group"), in
Section 11 ("Contacts and Transactions with the Company; Background of the
Offer") and in Section 12 ("The Merger Agreement; The Stockholders Agreement")
of the Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in the Introduction, Section 12 ("The
Merger Agreement; The Stockholder Agreement") and Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Purpose of the Offer; Plans
for the Company; Effect of the Offer on the Market for the Shares; Stock
Quotation; Exchange Act Registration; Margin Regulations") and Section 15
("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(e) The information set forth in Section 11 ("Contacts and Transactions
with the Company; Background of the Offer") and Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
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(a)(1) Offer to Purchase dated January 13, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Summary Advertisement as published on January 13, 1999.
(a)(8) Joint Press Release issued by General Chemical Group and the
Company on January 8, 1999.
(b)(1) Credit Agreement, dated as of June 15, 1998, by and among
General Chemical Group, Bank of America National Trust and
Savings Association, The Bank of Nova Scotia, The Chase
Manhattan Bank and the several lenders from time to time
parties thereto.
(c)(1) Agreement and Plan of Merger, dated as of January 7, 1999,
among Parent, the Purchaser and the Company.
(c)(2) Stockholders Agreement, dated as of January 7, 1999 among
Parent, the Purchaser and the Stockholders listed on
Schedule A thereto.
</TABLE>
7
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(c)(3) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Jerry A. Cooper.
(c)(4) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Michael J. Meier.
(c)(5) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Clifford Schumacher.
(c)(6) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Michael Madden.
(c)(7) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Benjamin Scherschel.
(c)(8) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Fred Burke.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
8
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SIGNATURE
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this Statement is true, complete and correct.
DN ACQUISITION CORPORATION
By: /s/ RICHARD R. RUSSELL
--------------------------------------
Name: Richard R. Russell
Title: President
NEW HAMPSHIRE OAK, INC.
By: /s/ RICHARD R. RUSSELL
--------------------------------------
Name: Richard R. Russell
Title: President and Chief
Executive Officer
THE GENERAL CHEMICAL GROUP INC.
By: /s/ RICHARD R. RUSSELL
--------------------------------------
Name: Richard R. Russell
Title: President and Chief
Executive Officer
Date: January 13, 1999
9
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EXHIBIT INDEX
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EXHIBIT PAGE
NO. DESCRIPTION NO.
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11(a)(1) Offer to Purchase dated January 13, 1999....................
11(a)(2) Letter of Transmittal.......................................
11(a)(3) Notice of Guaranteed Delivery...............................
11(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees......................................
11(a)(5) Letter to clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.........................
11(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9...............................
11(a)(7) Summary Advertisement as published on January 13, 1999......
11(a)(8) Joint Press Release issued by General Chemical Group and the
Company on January 8, 1999..................................
11(b)(1) Credit Agreement, dated as of June 15, 1998, by and among
General Chemical Group, Bank of America National Trust and
Savings Association, The Bank of Nova Scotia, The Chase
Manhattan Bank and the several lenders from time to time
parties thereto.............................................
11(c)(1) Agreement and Plan of Merger, dated as of January 7, 1999,
among Parent, the Purchaser and the Company.................
11(c)(2) Stockholders Agreement, dated as of January 7, 1999, among
Parent, the Purchaser and the stockholders listed on
Schedule A thereto..........................................
11(c)(3) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Jerry A. Cooper..................
11(c)(4) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Michael J. Meier.................
11(c)(5) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Clifford Schumacher..............
11(c)(6) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Michael Madden...................
11(c)(7) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Benjamin Scherschel..............
11(c)(8) Letter Agreement, dated January 7, 1999, among the
Purchaser, the Company and Fred Burke.......................
</TABLE>
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Exhibit 11(a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
DEFIANCE, INC.
at
$9.50 NET PER SHARE
by
DN ACQUISITION CORPORATION
an indirect wholly-owned subsidiary of
THE GENERAL CHEMICAL GROUP INC.
------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
------------------------
THE BOARD OF DIRECTORS OF DEFIANCE, INC. (THE "COMPANY") HAS UNANIMOUSLY
APPROVED THE MAKING OF THE OFFER AND THE MERGER (AS DEFINED HEREIN) AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE ADVISABLE AND ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES (AS DEFINED HEREIN).
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT
NUMBER OF SHARES THAT WOULD REPRESENT IN EXCESS OF 50% OF ALL OUTSTANDING SHARES
ON A FULLY DILUTED BASIS (SUCH BASIS ASSUMES ALL SHARES UNDERLYING VESTED AND
UNVESTED STOCK OPTIONS ARE ISSUED AND OUTSTANDING) ON THE DATE OF PURCHASE AND
(2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF
SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock of the Company, par value $0.05 per share (the "Shares"),
should either (1) complete and sign the Letter of Transmittal or a facsimile
copy thereof in accordance with the instructions in the Letter of Transmittal,
have such stockholder's signature thereon guaranteed if required by Instruction
1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or
such facsimile), or, in the case of a book-entry transfer effected pursuant to
the procedure set forth in Section 2 hereof, an Agent's Message (as defined
herein), and any other required documents to the Depositary (as defined herein)
and either deliver the certificates for such Shares to the Depositary along with
the Letter of Transmittal (or facsimile) or deliver such Shares pursuant to the
procedure for book-entry transfer set forth in Section 2 hereof prior to the
expiration of the Offer or (2) request such stockholder's broker, dealer, bank,
trust company or other nominee to effect the transaction for such stockholder. A
stockholder having Shares registered in the name of a broker, dealer, bank,
trust company or other nominee must contact such broker, dealer, bank, trust
company or other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedure for guaranteed delivery set forth in
Section 2 hereof.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its address and telephone
numbers set forth on the back cover of this Offer to Purchase.
------------------------
January 13, 1999
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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INTRODUCTION............................................................. 1
THE TENDER OFFER......................................................... 3
1. Terms of the Offer ......................................... 3
2. Procedure for Tendering Shares ............................. 4
3. Withdrawal Rights .......................................... 7
4. Acceptance for Payment and Payment ......................... 7
5. Certain Federal Income Tax Consequences .................... 8
6. Price Range of the Shares .................................. 9
7. Purpose of the Offer; Plans for the Company; Effect of the
Offer on the Market for the Shares; Stock Quotation;
Exchange Act Registration; Margin Regulations .............. 10
8. Certain Information Concerning the Company ................. 11
9. Certain Information Concerning the Purchaser, Parent and
General Chemical Group ..................................... 14
10. Source and Amount of Funds ................................. 14
11. Contacts and Transactions with the Company; Background of
the Offer .................................................. 15
12. The Merger Agreement; The Stockholders Agreement ........... 17
13. Dividends and Distributions ................................ 24
14. Certain Conditions of the Offer ............................ 24
15. Certain Legal Matters ...................................... 26
16. Fees and Expenses .......................................... 29
17. Miscellaneous .............................................. 29
Schedule I -- Directors and Executive Officers of General Chemical Group,
Parent and the Purchaser............................................... S-1
</TABLE>
i
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TO THE HOLDERS OF COMMON STOCK OF DEFIANCE, INC.:
INTRODUCTION
DN Acquisition Corporation, a Delaware corporation (the "Purchaser"), which
is a wholly-owned direct subsidiary of New Hampshire Oak, Inc., a Delaware
corporation ("Parent"), which is a wholly-owned direct subsidiary of The General
Chemical Group Inc., a Delaware corporation ("General Chemical Group"), hereby
offers to purchase all outstanding shares of common stock, par value $0.05 per
share (the shares of common stock of the Company being hereinafter referred to
as the "Shares"), of the Company, at a price of $9.50 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer"). The Offer is being made
pursuant to the Agreement and Plan of Merger, dated as of January 7, 1999 (the
"Merger Agreement"), among Parent, the Purchaser and the Company.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of American Stock Transfer & Trust
Company, which is acting as the Depositary (the "Depositary"), and Georgeson &
Company Inc., which is acting as Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16 hereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING
OF THE OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE ADVISABLE AND ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. THE
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ARRIVING AT ITS
DECISION TO APPROVE THE MAKING OF THE OFFER AND THE MERGER AND TO RECOMMEND THAT
STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES ARE
DESCRIBED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE
14D-9 (THE "SCHEDULE 14D-9"), WHICH IS BEING MAILED TO STOCKHOLDERS OF THE
COMPANY HEREWITH.
MCDONALD INVESTMENTS INC., THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED
TO THE BOARD OF DIRECTORS OF THE COMPANY A WRITTEN OPINION TO THE EFFECT THAT,
AS OF THE DATE OF SUCH OPINION, AND BASED UPON AND SUBJECT TO CERTAIN MATTERS
STATED THEREIN, THE $9.50 PER SHARE CASH CONSIDERATION TO BE RECEIVED BY THE
HOLDERS OF SHARES OF THE COMPANY IN CONNECTION WITH THE OFFER AND THE MERGER IS
FAIR TO THE STOCKHOLDERS OF THE COMPANY FROM A FINANCIAL POINT OF VIEW. SUCH
OPINION IS SET FORTH IN FULL AS AN EXHIBIT TO THE SCHEDULE 14D-9.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) AT LEAST THAT NUMBER OF SHARES THAT WOULD REPRESENT IN EXCESS OF 50% OF ALL
OUTSTANDING SHARES DETERMINED ON A FULLY DILUTED BASIS (SUCH BASIS ASSUMES ALL
SHARES UNDERLYING VESTED AND UNVESTED STOCK OPTIONS ARE ISSUED AND OUTSTANDING)
ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION") AND (II) ANY WAITING PERIOD
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND
THE REGULATIONS THEREUNDER (THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES
PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED (THE "HSR CONDITION").
THE PURCHASER RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")), WHICH
IT PRESENTLY HAS NO INTENTION OF EXERCISING (AND WHICH IT MAY NOT EXERCISE
WITHOUT THE COMPANY'S WRITTEN CONSENT), TO DECREASE, INCREASE OR WAIVE THE
MINIMUM CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, LESS THAN THE
MINIMUM NUMBER OF SHARES WHICH WOULD OTHERWISE BE REQUIRED TO SATISFY THE
MINIMUM CONDITION. SEE SECTIONS 1 AND 14 HEREOF. THE CONDITIONS SET FORTH IN
SECTION 14 HEREOF ARE REFERRED TO AS THE "OFFER CONDITIONS".
The Company has informed the Purchaser that, as of January 7, 1999, there
were 6,003,749 Shares issued and outstanding and 440,814 Shares reserved for
issuance upon the exercise of outstanding options to purchase Shares ("Stock
Options"). Accordingly, based on the foregoing assumptions, the Minimum
Condition will be satisfied if at least 3,222,282 Shares, or approximately 54%
of the outstanding Shares as of January 7, 1999 are
<PAGE> 4
validly tendered and not withdrawn prior to the Expiration Date. As described
below, there are 1,045,587 Shares which are subject to the Stockholders
Agreement and, subject to certain conditions, will be tendered to the Purchaser.
If the Minimum Condition is satisfied and the Purchaser accepts for payment
Shares tendered pursuant to the Offer, the Purchaser will be able to elect a
majority of the members of the Company's Board of Directors and to effect the
Merger without the affirmative vote of any other stockholder of the Company.
THE MERGER
Pursuant to the Merger Agreement, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into the Company (the "Merger"), with the Company surviving the
Merger (as such, the "Surviving Corporation") as a wholly-owned subsidiary of
Parent. In the Merger, each outstanding Share (other than Shares owned by
Parent, the Purchaser or any other subsidiary of Parent or held in the treasury
of the Company or by stockholders, if any, who are entitled to and who properly
exercise appraisal rights under Delaware law) will be converted into the right
to receive from the Surviving Corporation the Offer Price in cash, without
interest (the "Merger Consideration"). The Merger is subject to a number of
conditions, including approval by stockholders of the Company, if such approval
is required by applicable law. See Section 12 hereof.
THE STOCKHOLDERS AGREEMENT
In connection with the execution of the Merger Agreement, the Purchaser and
Parent entered into a Stockholders Agreement, dated as of January 7, 1999 (the
"Stockholders Agreement"), with each of Jerry A. Cooper, Thomas H. Roulston II,
Scott D. Roulston, Michael J. Meier, John D. Ong, George H. Lewis III, James E.
Heighway, Richard W. Lock, Clifford Schumacher, James L. Treece, Carl A.
Rispoli, Fred Burke, Roger Drummer, Michael Madden, Michael Pavlica, David
Piacenti, Benjamin Scherschel, Janice Schneikart and Phillip Tomczak
(collectively, the "Selling Stockholders"), pursuant to which such Selling
Stockholders have agreed to tender their Shares in the Offer and have granted to
the Purchaser an irrevocable option, exercisable upon the occurrence of certain
trigger events, to purchase the Shares owned beneficially and of record by the
Selling Stockholders (including Shares underlying Stock Options (such underlying
Shares, the "Option Shares")) at a price per Share equal to the Offer Price, in
cash. Pursuant to the Stockholders Agreement, the Selling Stockholders have also
agreed that, among other things, until the applicable termination date set forth
in the Stockholders Agreement, such Selling Stockholders will not transfer the
Shares subject to the Stockholders Agreement and will vote such Shares in favor
of the Merger and against certain competing transactions. An aggregate of
1,046,587 Shares are subject to the Stockholders Agreement (including 348,116
Option Shares), representing 16.2% of the Shares that, as of January 7, 1999,
were issued and outstanding on a fully diluted basis (such basis assumes all
Shares underlying vested and unvested stock options are issued and outstanding)
according to the Company.
INTENTION OF COMPANY OFFICERS AND DIRECTORS TO TENDER
All of the Company's executive officers and directors have agreed pursuant
to the Stockholders Agreement to tender all Shares owned by them in the Offer.
The Merger Agreement and the Stockholders Agreement are more fully
described in Section 12 hereof.
Certain Federal income tax consequences of the sale of Shares pursuant to
the Offer and the conversion of Shares pursuant to the Merger are described in
Section 5 hereof.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE> 5
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3
hereof. The term "Expiration Date" means 12:00 midnight, New York City time, on
Thursday, February 11, 1999, unless and until the Purchaser shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, will expire.
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the written consent of the Company, reduce the price per Share or
the number of Shares sought to be purchased or modify the form of consideration
to be received by holders of the Shares in the Offer, decrease, increase or
waive the Minimum Condition, impose additional conditions to the Offer or amend
any term of the Offer in a manner materially adverse to the holders of the
Shares.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser reserves the right (but shall not
be obligated), at any time and from time to time, and regardless of whether or
not any of the events or facts set forth in Section 14 hereof shall have
occurred, (a) to extend the period of time during which the Offer is open, and
thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (b) to
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
If by 12:00 midnight, New York City time, on Thursday, February 11, 1999
(or any date or time then set as the Expiration Date), any or all of the Offer
Conditions have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, (a) to terminate the Offer and not accept for payment or pay for any
Shares and return all tendered Shares to tendering stockholders, (b) to waive
all the unsatisfied conditions and accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn, (c)
to extend the Offer and, subject to the right of stockholders to withdraw Shares
until the Expiration Date, retain the Shares that have been tendered during the
period or periods for which the Offer is extended or (d) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by a public announcement of such event. In
the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), requires that the announcement be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser,
and such Shares may not be withdrawn except to the extent tendering stockholders
are entitled to withdrawal rights as described in Section 3 hereof. However, the
ability of the Purchaser to delay the payment for Shares that the Purchaser has
accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the
3
<PAGE> 6
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including a waiver of the Minimum Condition), the Purchaser will disseminate
additional tender offer materials and extend the Offer to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer, other than a change in price
or a change in the percentage of securities sought, will depend upon the facts
and circumstances then existing, including the relative materiality of the
changed terms or information. With respect to a change in price or a change in
the percentage of securities sought, a minimum period of 10 business days is
generally required to allow for adequate dissemination to stockholders.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the HSR Condition and the other Offer Conditions. Subject to the
terms and conditions contained in the Merger Agreement, the Purchaser reserves
the right (but shall not be obligated) to waive any or all such conditions.
However, if the Purchaser waives or amends the Minimum Condition during the last
five business days during which the Offer is open, the Purchaser will be
required to extend the Expiration Date so that the Offer will remain open for at
least five business days after the announcement of such waiver or amendment is
first published, sent or given to holders of Shares and may also be required to
extend the Offer if other conditions are waived, depending upon the materiality
of the waiver.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares and will be furnished to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder lists, or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (a) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined below),
and any other required documents, must be received by the Depositary at its
address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received by
the Depositary at its address or such Shares must be delivered pursuant to the
procedures for book-entry transfer set forth below (and a Book-Entry
Confirmation (as defined below) received by the Depositary), in each case prior
to the Expiration Date, or (b) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below.
The Depositary will establish accounts with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents, must, in any case, be transmitted to,
and received by, the Depositary at its address set forth on the back cover of
this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedures described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
4
<PAGE> 7
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book-Entry Transfer Facility's system whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (b) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (such
participant, an "Eligible Institution"). In all other cases, all signatures on
the Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be returned to a person other
than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, on or prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three Nasdaq Stock Market trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) either (i) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, (ii) in the case of a book-entry
transfer, an Agent's Message, and (c) any other documents required by the Letter
of Transmittal. Accordingly, tendering
5
<PAGE> 8
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after January 7, 1999. All such proxies will be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts for payment
Shares tendered by such stockholder as provided herein. Upon such appointment,
all prior powers of attorney, proxies and consents given by such stockholder
with respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent powers of attorney, proxies, consents or
revocations may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares and other securities or rights in
respect of any annual, special or adjourned meeting of the Company's
stockholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and other securities or rights, including voting at any
meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders. No tender of Shares will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or waived. None of the Purchaser, Parent, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and any payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to the Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
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<PAGE> 9
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after March 14, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover of this Offer to Purchase and must
specify the name of the person having tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer as set forth in Section 2 hereof, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility and otherwise comply with the Book-Entry Transfer
Facility's procedures. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 hereof at any time prior
to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, General Chemical Group, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 hereof promptly after the Expiration Date. All
determinations concerning the satisfaction of such terms and conditions will be
within the Purchaser's discretion, which determinations will be final and
binding. See Sections 1 and 14 hereof. The Purchaser expressly reserves the
right to delay acceptance for payment of or payment for Shares in order to
comply in whole or in part with any applicable law, including, without
limitation, the HSR Act. Any such delays will be effected in compliance with
Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay
for or return tendered securities promptly after the termination or withdrawal
of such bidder's offer).
General Chemical Group filed its Notification and Report Form under the HSR
Act with respect to the Offer on January 8, 1999. The Company expects to file
soon its Notification and Report Form. The waiting period under the HSR Act with
respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th
day after the date General Chemical Group's form is filed unless early
termination of the waiting period is granted. However, the Antitrust Division of
the Department of Justice (the "Antitrust Division") or the Federal Trade
Commission (the "FTC") may extend the waiting period by requesting additional
information or documentary material from General Chemical Group or the Company.
If such a request is made, such waiting period will expire at 11:59 p.m., New
York City time, on the 10th day after substantial compliance by General Chemical
Group or the Company with such request. Thereafter, the waiting period may only
be extended by court order. The waiting period under the HSR Act may be
terminated prior to its expiration by the FTC and the Antitrust Division.
General Chemical Group will request early termination of the waiting period,
although there can be no assurance that this request will be granted. Pursuant
to the Merger Agreement, the Purchaser may, but need not, extend the Offer until
the applicable waiting period under the HSR Act shall have expired or been
terminated. See
7
<PAGE> 10
Section 15 hereof for additional information concerning the HSR Act and the
applicability of the antitrust laws to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
(or a timely Book-Entry Confirmation with respect to) such Shares, (b) either
(i) a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, (ii) in the case of a
book-entry transfer, an Agent's Message, and (c) any other documents required by
the Letter of Transmittal. The per Share consideration paid to any stockholder
pursuant to the Offer will be the highest per Share consideration paid to any
other stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-l(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after termination or withdrawal of a tender offer,
and the terms of the Merger Agreement), the Depositary may, nevertheless, on
behalf of the Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to exercise,
and duly exercise, withdrawal rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 2, such Shares will be
credited to the account maintained at the Book-Entry Transfer Facility), as
promptly as practicable after the expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to General Chemical Group, or to one or more direct or
indirect wholly-owned subsidiaries of General Chemical Group, the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash in exchange for Shares pursuant to the Offer or the
Merger (and the receipt of cash by a stockholder that exercises appraisal rights
in connection with the Merger under Delaware law) will be a taxable transaction
for Federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and may also be a taxable transaction under applicable
state, local or foreign income or other tax laws. Generally, for Federal income
tax purposes, a tendering stockholder will recognize gain or loss equal to the
difference between the amount of cash received by the stockholder pursuant to
the Offer or the Merger (other than amounts received pursuant to a stockholder's
exercise of appraisal rights that are denominated as interest, which amounts
would be taxable as ordinary income) and the aggregate tax basis in the Shares
tendered by the stockholder and purchased pursuant to the Offer or converted in
the Merger, as the case may be.
If Shares are held by a stockholder as capital assets, gain or loss
recognized by the stockholder will be capital gain or loss. Such capital gain or
loss will be long-term if such stockholder's holding period for the Shares
exceeds twelve months and short-term in all other cases.
8
<PAGE> 11
A stockholder that tenders Shares may be subject to 31% backup withholding
unless the stockholder provides its TIN and certifies that such number is
correct or properly certifies that it is awaiting a TIN, or unless an exemption
applies. Exemptions are available for stockholders that are corporations and for
certain foreign individuals and entities. A stockholder that does not furnish a
required TIN may be subject to a penalty imposed by the IRS. See "Backup
Withholding" under Section 2 hereof.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO OTHER
HOLDERS OF SHARES IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF THE SHARES
The Shares are traded on the Nasdaq National Market under the symbol
"DEFI". The following table sets forth, for each of the periods indicated, the
high and low sales prices per Share as reported by the Nasdaq National Market
and the Dow Jones News Retrieval Service.
DEFIANCE, INC.
<TABLE>
<CAPTION>
SALES PRICES
--------------
FISCAL YEAR ENDING IN JUNE HIGH LOW
-------------------------- ----- -----
<S> <C> <C>
1997
First Quarter (July 1, 1996 -- September 30, 1996)....... $6.88 $5.38
Second Quarter (October 1, 1996 -- December 31, 1996).... 6.88 6.25
Third Quarter (January 1, 1997 -- March 31, 1997)........ 8.00 6.38
Fourth Quarter (April 1, 1997 -- June 30, 1997).......... 8.13 6.13
1998
First Quarter (July 1, 1997 -- September 30, 1997)....... 8.75 6.63
Second Quarter (October 1, 1997 -- December 31, 1997).... 8.75 7.13
Third Quarter (January 1, 1998 -- March 31, 1998)........ 10.25 7.88
Fourth Quarter (April 1, 1998 -- June 30, 1998).......... 9.00 8.13
1999
First Quarter (July 1, 1998 -- September 30, 1998)....... 8.44 6.69
Second Quarter (October 1, 1998 through December 31,
1998).................................................. 7.13 6.25
Third Quarter (January 1, 1999 -- January 7, 1999)....... 6.50 6.25
</TABLE>
On January 7, 1999, the last full trading day before the public
announcement of the execution of the Merger Agreement, the last reported sales
price of the Shares on the Nasdaq National Market was $6.50 per Share. On
January 12, 1999, the last full trading day before commencement of the Offer,
the last reported sales price of the Shares on the Nasdaq National Market was
$9 7/32 per Share. Stockholders are urged to obtain current market quotations
for the Shares.
9
<PAGE> 12
7. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; EFFECT OF THE OFFER ON THE
MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION; MARGIN
REGULATIONS
Purpose. The purpose of the Offer is to enable General Chemical Group to
acquire control of, and the entire equity interest in, the Company. The Offer,
as the first step in the acquisition of the Company, is intended to facilitate
the acquisition of all the Shares and to provide the stockholders of the Company
with cash consideration of $9.50 per Share for all of their Shares at the
earliest possible time. The purpose of the Merger is to acquire all Shares not
tendered and purchased pursuant to the Offer.
Plans for the Company. The Merger Agreement provides that promptly upon the
purchase by the Purchaser of more than 50% of the outstanding Shares on a
fully-diluted basis pursuant to the Offer and from time to time thereafter, the
Company shall use its best efforts to allow the Purchaser to designate up to the
minimum number of directors of the Company necessary in order for the result
(expressed as a fraction) derived by dividing the number of directors so
designated by the total number of directors to be at least equal to the result
(expressed as a fraction) derived by dividing the shares then held by the
Purchaser by the total number of Shares then outstanding, provided, however,
that until the consummation of the Merger, the Board of Directors of the Company
will have at least two (2) Independent Directors. The term "Independent
Director" means a director who is neither designated by the Purchaser nor
otherwise affiliated with the Parent or the Purchaser and is not an employee of
the Company or any of its subsidiaries. The Purchaser has designated Paul M.
Meister, Richard R. Russell, Todd M. DuChene, Ralph M. Passino and Paul M.
Montrone to fill such vacancies.
After the Offer has been consummated, subject to the conditions set forth
in the Merger Agreement, it is anticipated that the Merger Agreement will be
submitted to the stockholders of the Company for approval. In the Merger
Agreement, Parent and the Purchaser have agreed to vote or cause to be voted all
Shares owned by them in favor of approval and adoption of the Merger Agreement.
If after consummation of the Offer the Purchaser holds 90% or more of the
outstanding Shares, the Purchaser intends to effect a "short-form merger" under
the Delaware General Corporation Law (the "DGCL") without a meeting of, or
action by, the stockholders of the Company.
The Purchaser and General Chemical Group currently have no plans or
proposals that would relate to, or result in, any extraordinary corporate
transaction involving the Company, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries (except the merger
of the Purchaser into the Company, as described in Section 12 below) or a sale
or transfer of a material amount of assets of the Company or any of its
subsidiaries to any unaffiliated third party. The Purchaser and General Chemical
Group currently have no plans or proposals to consolidate, establish, terminate,
convert or amend employee benefit plans; close any plant or facility of the
Company or of any of its subsidiaries or affiliates; change or reduce the work
force of the Company or any of its subsidiaries or affiliates; or make any other
change in its business, corporate structure, capitalization or dividend policy,
management personnel or policies of employment. General Chemical Group is
currently considering how best to integrate the business of the Company with the
current operations of General Chemical Group and its subsidiaries in order to
improve operating efficiencies, including through the consolidation of
management, but General Chemical Group has no current plans or proposals in this
regard.
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Stock Quotation. Depending upon the aggregate market value and per Share
price of any Shares not purchased pursuant to the Offer, the Shares may no
longer meet the standards of the National Association of Securities Dealers,
Inc. (the "NASD") for continued designation for the Nasdaq National Market. The
maintenance of such designation requires that an issuer substantially meet one
of two maintenance standards. The issuer must have either (i)(a) at least
750,000 shares publicly held, (b) at least 400 shareholders of round lots, (c) a
market value of publicly held shares of at least $5 million, (d) a minimum bid
price per share of $1, (e) at least two registered and active market makers for
its shares and (f) net tangible assets of at least $4 million or (ii)(a) at
least 1.1 million publicly held shares, (b) at least 400 shareholders of round
lots, (c) a market value of
10
<PAGE> 13
publicly held shares of at least $15 million, (d)(1) a market capitalization of
at least $50 million or (2) total assets and total revenue of at least $50
million each (for the most recently completed fiscal year or two of the last
three most recently completed fiscal years), (e) a minimum bid price per share
of $5 and (f) at least four registered and active market makers for its shares.
Shares held directly or indirectly by directors, officers or beneficial owners
of more than 10% of the Shares outstanding are not considered as being publicly
held for this purpose.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock
Market, and the Shares are no longer included in Nasdaq National Market or in
any other tier of the Nasdaq Stock Market, the market for the Shares could be
adversely affected.
In the event the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible that
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interest in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933 may be impaired or eliminated. The Purchaser intends to seek to cause the
Company to apply for termination of registration of the Shares under the
Exchange Act as soon after the completion of the Offer as the requirements for
such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the Nasdaq Stock Market
and the registration of the Shares under the Exchange Act will be terminated
following the consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal offices at 1111
Chester Ave., Suite 750, Cleveland, Ohio 44114-3516. The Company was
incorporated as a holding company on August 19, 1985 and, through its
subsidiaries, manufactures specialty anti-friction bearings and metal prototype
dies and parts and provides testing and tooling development services to the U.S.
motor vehicle industry. The Company's operating subsidiaries specialize in
highly engineered products and services.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted from the information
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1998 (the "Company 1998 10-K"), and the Company's Quarterly Report on
Form 10-Q for the three-month period ended September 30, 1998 (the "Company 1998
10-Q"). More
11
<PAGE> 14
comprehensive financial information is included in the Company 1998 10-K and the
Company 1998 10-Q, and the following summary is qualified in its entirety by
reference to the Company 1998 10-K, the Company 1998 10-Q and such other
documents and all the financial information (including any related notes)
contained therein. The Company 1998 10-K, the Company 1998 10-Q and such other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information".
DEFIANCE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
------------------ ------------------------------
1998 1997 1998 1997 1996
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME:
Net sales............................. $21,980 $20,601 $89,251 $92,123 $103,975
Cost of goods sold.................... 18,422 16,977 70,719 72,719 84,502
------- ------- ------- ------- --------
Gross profit............................ 3,558 3,624 18,532 19,404 19,473
Selling and administrative expenses... 2,982 2,888 10,569 10,699 11,296
Other charges......................... -- -- -- 632 2,600
------- ------- ------- ------- --------
Operating earnings...................... 576 736 7,963 8,073 5,577
Interest expenses -- net.............. 232 323 1,160 1,673 1,680
------- ------- ------- ------- --------
Earnings before income tax provision.... 344 413 6,803 6,400 3,897
Income tax provision.................. 123 151 2,287 2,065 2,299
------- ------- ------- ------- --------
Net earnings............................ $ 221 $ 262 $ 4,516 $ 4,335 $ 1,598
------- ------- ------- ------- --------
Basic and diluted net earnings per
common share....................... $ 0.04 $ 0.04 $ 0.73 $ 0.67 $ 0.24
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
------------- ------------------
1998 1998 1997
------------- ------- -------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS:
ASSETS
Current Assets:
Cash.................................................. $ 323 $ 2,916 $ 188
Accounts receivable, less allowance for doubtful
accounts............................................ 19,568 16,679 21,492
Inventories........................................... 3,630 3,801 3,055
Deferred income taxes................................. 600 590 565
Prepaid expenses and other current assets............. 3,023 3,311 3,674
------- ------- -------
Total current assets............................. 27,144 27,297 28,974
------- ------- -------
Property, Plant and Equipment -- net..................... 34,461 70,261 69,278
Cost in Excess of Net Assets of Acquired Companies....... 4,557 4,619 4,871
Other Assets............................................. 1,322 1,304 2,152
------- ------- -------
Total assets..................................... $67,484 $67,942 $73,819
======= ======= =======
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
------------- ------------------
1998 1998 1997
------------- ------- -------
<S> <C> <C> <C>
LIABILITIES
Current Liabilities:
Current maturities of long term obligations........... $ 2,963 $ 3,353 $ 4,829
Accounts payable...................................... 3,955 4,967 5,881
Accrued payroll and employee benefits................. 3,414 3,707 3,833
Accrued expenses...................................... 1,982 2,648 2,650
------- ------- -------
Total current liabilities........................ 12,314 14,675 17,193
Long Term Obligations.................................... 12,982 9,955 14,968
Deferred Income Taxes.................................... 3,252 3,209 3,267
Contingencies............................................ -- -- --
Stockholders' Equity..................................... 38,936 40,103 38,391
------- ------- -------
Total liabilities and stockholders' equity....... $67,484 $67,942 $73,819
======= ======= =======
</TABLE>
Certain Company Projections. During the course of discussions between
Parent and the Company, the Company provided Parent with certain non-public
business and financial information about the Company. The Company did not
prepare the projections and forecasts in anticipation of the Offer, any prior
tender offer or other public disclosure. This information was prepared in early
July of 1998 and included forecasts for the fiscal years ending June 30, 1999,
2000 and 2001. Such projections include forecasts of total sales of $94.8
million, $100.4 million and $109.3 million, gross profit of $21.8 million, $25.3
million and $27.8 million, earnings before interest and taxes of $8.8 million,
$11.8 million and $13.2 million, and net income of $5.1 million, $7.0 million
and $7.9 million for fiscal 1999, 2000 and 2001, respectively. The Company does
not as a matter of course make public any projections as to future performance
or earnings, and the projections set forth above are included in this Offer to
Purchase only because the information was provided to Parent. The projections
were not prepared with a view to public disclosure or compliance with the
published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections or
forecasts. The Company's internal operating projections are, in general,
prepared solely for internal use and capital budgeting and other management
decisions and are subjective in many respects and thus susceptible to various
interpretations and periodic revision based on actual experience and business
developments. The projections were based on a number of assumptions that are
beyond the control of the Company, the Purchaser, Parent or General Chemical
Group or their respective financial advisors, including economic forecasting
(both general and specific to the Company's business), which is inherently
uncertain and subjective and were predicated on the assumption that the Company
would continue as an independent, "stand alone" enterprise during the entire
period covered by the projections. None of the Company, the Purchaser, Parent or
General Chemical Group or their respective financial advisors assumes any
responsibility for the accuracy of any of the projections. The inclusion of the
foregoing projections should not be regarded as an indication that the Company,
the Purchaser, Parent or General Chemical Group or any other person who received
such information considers it an accurate prediction of future events. None of
the Company, the Purchaser, Parent or General Chemical Group intends to update,
revise or correct such projections if they become inaccurate (even in the short
term).
Available Information. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is disclosed in the Company's proxy statement
dated September 18, 1998, and filed with the Commission. Such information should
be available for inspection at the public reference facilities of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such information should be
obtainable from the Public Reference Section of the Commission upon payment of
prescribed fees. Such material should also be available for inspection at the
offices of Nasdaq Operations, 1735
13
<PAGE> 16
K Street, N.W., Washington, D.C. 20006. The Commission also maintains a
worldwide web site at http://www.sec.gov which contains reports, proxy and
information statements and other information about companies, including the
Company, that file electronically.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser, Parent and General Chemical Group
do not have any knowledge that any such information is untrue, none of the
Purchaser, Parent or General Chemical Group takes any responsibility for the
accuracy or completeness of such information or for any failure by the Company
to disclose events that may have occurred and may affect the significance or
accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER, PARENT AND
GENERAL CHEMICAL GROUP
The Purchaser, a Delaware corporation, which is a wholly-owned direct
subsidiary of Parent, was organized to acquire the Company and has not conducted
any unrelated activities since its organization. The principal office of the
Purchaser is located at the principal office of General Chemical Group. All
outstanding shares of capital stock of the Purchaser are owned by Parent. Parent
is a wholly-owned direct subsidiary of General Chemical Group. The principal
office of Parent is located at the principal office of General Chemical Group.
All outstanding shares of capital stock of Parent are owned by General Chemical
Group.
General Chemical Group is a Delaware corporation with its principal
executive office located at Liberty Lane, Hampton, NH 03842. General Chemical
Group is a publicly traded company registered with the Commission and listed on
the New York Stock Exchange under the symbol "GCG". General Chemical Group is a
diversified manufacturing company predominantly engaged in the production of
inorganic chemicals. General Chemical Group also manufactures precision and
highly engineered stamped and machined metal products, principally automotive
engine parts.
Financial information with respect to General Chemical Group and its
subsidiaries is included in General Chemical Group's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 and in General Chemical Group's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998,
which are incorporated herein by reference, and other documents filed by General
Chemical Group with the Commission. Such reports and other documents should be
available for inspection and copies thereof should be obtainable in the manner
set forth below under "Available Information."
Available Information. General Chemical Group is subject to the
informational requirements of the Exchange Act and, in accordance therewith, is
required to file reports relating to its business, financial condition and other
matters. Information as of particular dates concerning General Chemical Group's
directors and officers, their remuneration, stock options and other matters, the
principal holders of General Chemical Group's securities and any material
interest of such persons in transactions with General Chemical Group is
disclosed in General Chemical Group's proxy statement dated March 30, 1998, and
filed with the Commission. Such information may be inspected at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, and at the regional offices of the
Commission located at Seven World Trade Center, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable from the Public Reference Section of the
Commission upon payment of the prescribed fees. Such material should also be
available for inspection at the library of the New York Stock Exchange, 20 Broad
Street, New York, NY 10005. The Commission also maintains a worldwide web site
at http://www.sec.gov which contains reports, proxy and information statements
and other information about companies, including General Chemical Group, that
file electronically.
10. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase
the Shares that are outstanding on a fully diluted basis (such basis assumes all
Shares underlying vested and unvested stock options are issued and outstanding)
pursuant to the Offer and to consummate the Merger under the Merger Agreement
and to pay fees and expenses related to the Offer and the Merger will be
approximately $60 million. The Purchaser plans to
14
<PAGE> 17
obtain all funds needed for the Offer and the Merger from Parent. Parent intends
to obtain these funds from General Chemical Group. General Chemical Group
intends to obtain these funds by borrowing from an existing $300 million
revolving credit facility (the "Revolving Facility") created under a credit
agreement by and among General Chemical Group, Bank of America National Trust
and Savings Association, The Bank of Nova Scotia, The Chase Manhattan Bank and
the several lenders from time to time parties thereto (as defined therein) dated
as of June 15, 1998 (the "Credit Agreement"), a copy of which has been filed
with the Commission as an Exhibit to the 14D-1 and is incorporated herein by
reference. General Chemical Group does not consider that there are any
conditions or restrictions that would limit it from obtaining these funds under
the Credit Agreement. The Revolving Facility bears interest at a rate equal to a
spread over a reference rate chosen by General Chemical Group from various
options and matures on June 15, 2004. The Revolving Facility is secured by a
first priority security interest in all of the capital stock of General Chemical
Group's domestic subsidiaries and 65 percent of the capital stock of General
Chemical Group's foreign subsidiaries. Such borrowings may be repaid by General
Chemical Group from time to time, in whole or in part, from internally generated
funds or from the proceeds of other borrowings. The Offer is not conditioned
upon obtaining financing.
11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER
During March, 1998, Paul M. Meister, Director of General Chemical Group and
Managing Director of Latona Associates Inc. ("Latona"), General Chemical Group's
financial adviser, and certain other representatives of Latona met with Thomas
H. Roulston, Chairman of the Company, and Jerry A. Cooper, President and CEO of
the Company, in Michigan. During this meeting the parties acknowledged their
mutual interest in pursuing discussions regarding possible strategic
opportunities between General Chemical Group and the Company.
On April 23, 1998, the Company and General Chemical Group executed a mutual
confidentiality agreement. Upon execution of the confidentiality agreement, the
Company provided Latona with limited information concerning the Company,
including internal financial statements reflecting actual results through March
1998 and full fiscal year estimated results through June 1998.
During April and May 1998, representatives of Latona and a consultant to
General Chemical Group met with representatives of the Company and visited the
Company's corporate headquarters and several of the Company's operating
facilities. Following these visits, the parties agreed to continue their
discussions regarding potential strategic opportunities between General Chemical
Group and the Company and the Company agreed to provide Latona with limited
information concerning the Company.
On June 29, 1998, representatives of Latona met with representatives of the
Company in Cleveland. The Company outlined its strategy with respect to its
various businesses and indicated that the Company would consider the possibility
of a business combination transaction involving the Company and General Chemical
Group if the terms of such transaction were acceptable to the Company's Board of
Directors. No formal proposals regarding any business combination transaction
were made, but the parties agreed that the Company would provide Latona with
certain additional information so that Latona and General Chemical Group could
examine the potential benefits of any such transaction.
On July 9, 1998, the Company provided Latona with certain additional
information concerning the Company, including projected results for the fiscal
years ending June 30, 1999, 2000 and 2001. On July 17, 1998, representatives of
General Chemical Group and Latona reviewed the information provided on July 9,
1998 with representatives of the Company, via telephone.
Representatives of Latona and General Chemical Group and representatives of
the Company had several additional telephone conversations during July 1998 and
August 1998, but no substantive discussions between representatives of Latona
and General Chemical Group and representatives of the Company were held between
July 17, 1998 and September 17, 1998. On that date, a representative of Latona
called Mr. Cooper indicating that General Chemical Group remained interested in
purchasing the Company.
On October 5, 1998, representatives of Latona met with Mr. Roulston in New
York and expressed General Chemical Group's willingness to consider further a
possible business combination transaction involving General Chemical Group and
the Company at a price in the range of $10 per share, subject to, among other
things,
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satisfactory completion of General Chemical Group's due diligence investigation
and entering into a mutually satisfactory merger agreement.
On October 15, 1998 and October 23, 1998, the Company provided Latona with
certain additional information concerning the Company, including internal
financial statements reflecting actual results by subsidiary for the months
ended June 30, July 31, August 31 and September 30, 1998 as well as corporate-
and subsidiary-level plan books. Between October 29, 1998 and November 30, 1998,
representatives of General Chemical Group and Latona conducted their due
diligence review of the Company at the Company's corporate headquarters and all
of the Company's operating facilities.
On October 21, 1998, General Chemical Group's counsel delivered a first
draft of the proposed Merger Agreement and Stockholders Agreement to the
Company's counsel. During the following months, General Chemical Group and the
Company and their respective counsel proceeded with extensive negotiations of
the terms of the Merger Agreement. In addition, General Chemical Group and the
Company and their respective counsel negotiated the terms of the Stockholders
Agreement.
In November and December 1998, representatives of Latona and General
Chemical Group and representatives of the Company, including each party's
respective counsel, held numerous discussions concerning General Chemical
Group's ongoing review of the information provided by the Company.
On December 2, 1998, the Board of Directors of General Chemical Group held
a meeting at which they reviewed a possible business combination transaction
involving General Chemical Group and the Company and reviewed drafts of the
Merger Agreement and the Stockholders Agreement. General Chemical Group's Board
of Directors authorized General Chemical Group and Latona to continue
negotiations with the Company concerning such transaction and to proceed with
such a transaction at a price not to exceed $10.00 per Share subject to
finalizing due diligence and documentation.
In late December, Mr. Roulston and representatives of Latona discussed the
price at which General Chemical Group would be willing to make an all cash
tender offer for all of the outstanding Shares of the Company, subject to
execution of the Merger Agreement. On December 28, 1998, as a result of further
negotiations, the parties ultimately agreed to a price of $9.50 per Share. Over
the next 10 days, the parties continued to negotiate the terms of the
transaction agreements. On Thursday, January 7, 1999, the Company's Board of
Directors approved the terms of the Merger Agreement, the Stockholders Agreement
and the transactions contemplated by such agreements and the parties executed
the transaction agreements. General Chemical Group and the Company publicly
announced the transaction on Friday, January 8, 1999.
On January 13, 1999, General Chemical Group, Parent and the Purchaser
commenced the Offer.
The Purchaser and the Company have signed a letter with each of Messrs
Cooper, Meier, Schumacher, Scherschel, Burke and Madden (together, the "Change
of Control Letters") (i) to confirm amounts that may be due to such employees
pursuant to, in the case of Mr. Cooper, an existing agreement with the Company
and, in the case of the other employees, the Company's Change of Control Policy
dated July 24, 1998 upon such employee's termination of employment with the
Company due to a change of control of the Company and (ii) to continue salary,
bonus and benefits provided to each of these executives at no less than current
levels prior to a termination due to a change of control. This summary is
qualified in its entirety by reference to the Change of Control Letters, copies
of which have been filed with the Commission as Exhibits to the Schedule 14D-1
relating to the Offer and which are incorporated herein by reference.
Other arrangements. Except as described in this Offer to Purchase
(including Schedule I hereto), none of the Purchaser, Parent or General Chemical
Group nor, to the best knowledge of the Purchaser, Parent and General Chemical
Group, any of the persons listed in Schedule I hereto, nor any associate or
majority-owned subsidiary of the Purchaser, Parent, General Chemical Group or
any of the persons so listed, beneficially owns any equity security of the
Company, and none of the Purchaser, Parent or General Chemical Group, nor, to
the best knowledge of the Purchaser, Parent and General Chemical Group, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
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Except as described in this Offer to Purchase, as of the date hereof (a)
there have not been any contacts, transactions or negotiations between the
Purchaser, Parent and General Chemical Group, any of General Chemical Group's
subsidiaries or, to the best knowledge of the Purchaser, Parent and General
Chemical Group, any of the persons listed in Schedule I hereto, on the one hand,
and the Company or any of its directors, officers or affiliates, on the other
hand, that are required to be disclosed pursuant to the rules and regulations of
the Commission and (b) none of the Purchaser, Parent or General Chemical Group
nor, to the best knowledge of the Purchaser, Parent and General Chemical Group,
any of the persons listed in Schedule I hereto has any contract, arrangement,
understanding or relationship with any person with respect to any securities of
the Company.
12. THE MERGER AGREEMENT; THE STOCKHOLDERS AGREEMENT
The following is a summary of certain provisions of the Merger Agreement
and the Stockholders Agreement, copies of which have been filed with the
Commission as Exhibits to the Schedule 14D-1 relating to the Offer and are
incorporated herein by reference. Such summaries are qualified in their entirety
by reference to the text of such agreements.
THE MERGER AGREEMENT
The Merger Agreement provides that following the satisfaction or waiver of
the conditions described below under "Conditions to the Merger", the Purchaser
will be merged with and into the Company, and each then outstanding Share (other
than Shares owned by the Company, Parent, the Purchaser, any other subsidiary of
Parent or by stockholders, if any, who are entitled to and who properly exercise
appraisal rights under Delaware law) will be converted into the right to receive
an amount in cash equal to the price per Share paid pursuant to the Offer.
Vote Required To Approve Merger. The DGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board of Directors and generally by the holders of the Company's
outstanding voting securities. The Board of Directors of the Company has
approved the making of the Offer and the Merger; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by the Company's stockholders if the "short-form" merger procedure
described below is not available. Under the DGCL, the affirmative vote of
holders of a majority of the voting power of the then outstanding Shares
(including any Shares owned by the Purchaser) is generally required to approve
the Merger. If the Purchaser acquires, through the Offer, the Stockholders
Agreement or otherwise, a majority of the voting power of the outstanding Shares
(which would be the case if the Minimum Condition were satisfied and the
Purchaser were to accept for payment Shares tendered pursuant to the Offer), it
would have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company.
Under the DGCL, if a corporation owns 90% or more of each outstanding class
of capital stock of another corporation, it can effect a "short-form" merger
with such corporation without prior notice to, or any other action by, any other
stockholder of such corporation. As a result, assuming no Stock Options are
exercised following January 7, 1999, if the Purchaser were to acquire ownership
of 5,403,375 Shares (or, if all Stock Options were vested and exercised,
5,800,107 shares) pursuant to the Offer, the Purchaser would own more than 90%
of the only class of capital stock of the Company then outstanding and would be
able to effect the Merger pursuant to the "short-form" merger provisions of the
DGCL. See Section 15.
Conditions to the Merger. The Merger Agreement provides that the
obligations of Parent, the Purchaser and the Company to consummate the Merger
are subject to the satisfaction of certain conditions, including the following:
(a) the Purchaser shall have purchased all Shares duly tendered and not
withdrawn pursuant to the terms of the Offer and subject to the terms thereof;
provided that the obligation of the Parent and the Purchaser to effect the
Merger shall not be conditioned on the fulfillment of such condition if the
failure of the Purchaser to purchase the Shares pursuant to the Offer shall have
constituted a breach of the Offer or of the Merger Agreement; (b) the
consummation of the Merger shall not be precluded by any order, decree or
injunction of a court of competent jurisdiction (each party having agreed to use
its best efforts to have any such order reversed or injunction lifted), and
there shall not have been any action taken or any law enacted, promulgated or
deemed applicable to the Merger by any court, governmental agency or regulatory
or administrative authority, foreign or
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<PAGE> 20
domestic (each, a "Governmental Entity") that makes consummation of the Merger
illegal; (c) if required by the Certificate of Incorporation and By-Laws of the
Company and the DGCL, the Merger Agreement shall have been approved and adopted
by the affirmative vote of the holders of the requisite number of Shares in
accordance with the Certificate of Incorporation and By-Laws of the Company and
the DGCL; and (d) any applicable waiting period under the HSR Act shall have
expired or been terminated. The Merger Agreement also provides that the
obligations of Parent and the Purchaser to consummate the Merger are subject to
the satisfaction, at or before the effective time of the Merger, of the
following additional conditions: (a) the Company shall not have received notice
from the holder or holders of more than 3% of the outstanding Shares, determined
on a fully diluted basis, that such holder or holders have exercised or intend
to exercise its or their appraisal rights under Section 262 of the DGCL; (b)
there shall not be pending or threatened by any Governmental Entity any suit,
action or proceeding (and there shall not be pending by any other person any
suit, action or proceeding which has a reasonable likelihood of success), in
each case (i) challenging the acquisition by Parent or the Purchaser of any
shares of capital stock of the Company or the Surviving Corporation, seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by the Merger Agreement or the Stockholders Agreement
or seeking to obtain from the Company, Parent or the Purchaser any damages that
are material taken as a whole or Parent and its subsidiaries taken as a whole,
as applicable, (ii) seeking to prohibit or limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries of any material
portion of the business or assets of the Company and its subsidiaries, taken as
a whole, or Parent and its subsidiaries, taken as a whole, as applicable, or to
compel the Company, Parent or any of their respective subsidiaries to dispose of
or hold separate any material portion of the business or assets of the Company
and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as
a whole, as applicable, as a result of the Merger or any of the other
transactions contemplated by the Merger Agreement or the Stockholders Agreement,
(iii) seeking to impose limitations on the ability of Parent to acquire or hold,
or exercise full rights of ownership of, any shares of capital stock of the
Company or the Surviving Corporation, including the right to vote the Shares, or
common stock of the Surviving Corporation, on all matters properly presented to
the stockholders of the Company or the Surviving Corporation, (iv) seeking to
prohibit Parent and its subsidiaries from effectively controlling in any
material respect the business or operations of the Company and its subsidiaries,
taken as a whole, or (v) which otherwise could reasonably be expected to have a
Material Adverse Effect on the Company or Parent; and (c) there shall not be any
statute, rule, regulation, judgment or order enacted, entered, enforced or
promulgated that is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in clauses (ii) through (iv) of subparagraph (b)
above.
As used herein,"Material Adverse Effect" means, with respect to any person
or entity, a material adverse effect on the business, assets, liabilities,
operations or condition (financial or otherwise) of such person or entity and
its subsidiaries, taken as a whole.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger abandoned at any time prior to the effective time of the Merger,
whether prior to or after approval of the terms of the Merger Agreement by the
stockholders of the Company:
(1) by the mutual written consent of Parent, the Purchaser and the
Company;
(2) by either the Parent or the Company if, on or before April 7,
1999, and without fault of such terminating party, the Purchaser shall not
have purchased in the Offer such number of Shares which represent in excess
of 50% of the outstanding Shares on a fully diluted basis, or the Merger
shall not have been consummated on or before July 6, 1999, provided,
however, that the right to terminate the Merger Agreement is not available
to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Offer
or the Merger to have occurred on or before the aforesaid date;
(3) by either the Parent or the Company if the Offer shall expire or
terminate in accordance with its terms without any Shares having been
purchased thereunder and, in the case of termination by the Parent, the
Purchaser shall not have been required by the terms of the Offer or the
Merger Agreement to purchase any Shares pursuant to the Offer;
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<PAGE> 21
(4) by the Company if the Purchaser shall not timely commence the
Offer as provided in the Merger Agreement;
(5) if approval by the Company's stockholders is required by law, by
either the Purchaser or the Company if, upon a duly held vote of the
Company's stockholders, such stockholder approval shall not have been
obtained;
(6) unilaterally by the Purchaser or the Company (i) if the other
fails to perform any material covenant in any material respect in the
Merger Agreement, and does not cure the failure in all material respects
within 30 business days after the terminating party delivers written notice
of the alleged failure or (ii) if any condition to the obligations of that
party is not satisfied (other than by reason of a breach by that party of
its obligations hereunder), and it reasonably appears that the condition
cannot be satisfied prior to July 6, 1999;
(7) by either the Purchaser or the Company if either is prohibited by
an order or injunction (other than an order or injunction on a temporary or
preliminary basis) of a court of competent jurisdiction or other
Governmental Entity from consummating the Offer or the Merger and all means
of appeal and all appeals from such order or injunction have been finally
exhausted;
(8) by the Purchaser if the Board of Directors of the Company shall
have withdrawn or modified, or resolved to withdraw or modify, in any
manner which is adverse to Parent or the Purchaser, its recommendation or
approval of the Offer, the Merger or the Merger Agreement; provided,
however, that such a termination shall not become effective if, as a result
of the Company's receipt of a proposal for an Acquisition Transaction (as
defined under "Takeover Proposals") from a third party, the Company, in
accordance with the Merger Agreement, withdraws or modifies, or resolves to
withdraw or modify, in any manner which is adverse to Parent or the
Purchaser, its recommendation or approval of the Offer, the Merger or the
Merger Agreement and if within ten (10) business days of taking and
disclosing to its stockholders the aforementioned position the Company
publicly reconfirms its recommendation of the transactions contemplated by
the Merger Agreement; or
(9) by the Company if (i) the Board of Directors of the Company shall
have determined in good faith, based on the advice of outside counsel, that
it is necessary, in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, to terminate the Merger
Agreement to enter into an agreement with respect to or to consummate a
transaction constituting a Superior Proposal (as defined under "Takeover
Proposals"), (ii) the Company shall have given notice to the Purchaser
advising the Purchaser that the Company has received a Superior Proposal
from a third party, specifying the material terms and conditions (including
the identity of the third party) and that the Company intends to terminate
the Merger Agreement, (iii) either (A) the Purchaser shall not have revised
its proposal for an Acquisition Transaction within two (2) business days
from the time on which such notice is deemed to have been given to Parent,
or (B) if the Purchaser within such period shall have revised its proposal
for an Acquisition Transaction, the Board of Directors of the Company,
after receiving advice from the Company's financial advisor, shall have
determined in its good faith reasonable judgment that the third party's
proposal for an Acquisition Transaction is superior to Parent's revised
proposal for an Acquisition Transaction and (iv) the Company, at the time
of such termination, pays the Expenses and the Termination Fee (each as
defined under "Fees and Expenses" below).
Takeover Proposals. The Merger Agreement provides that the Company shall
not, shall not permit any of its subsidiaries to, and shall not authorize or
permit any officer, director or employee or any investment banker, attorney,
accountant or other advisor or representative of the Company or any of its
subsidiaries to, directly or indirectly, except as otherwise described in this
or the next paragraph (i) initiate, solicit, negotiate, encourage, or provide
confidential information to facilitate any proposal or offer to acquire all or
any substantial part of the business and properties of the Company and its
subsidiaries, taken as a whole, or beneficial ownership (as determined pursuant
to Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the capital
stock of the Company, whether by merger, purchase of assets, tender offer or
otherwise, whether for cash, securities or any other consideration or
combination thereof (such transactions being referred to herein as "Acquisition
Transactions"), (ii) enter into any agreement with respect to any Acquisition
Transaction or give any approval of
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the type referred to in the next paragraph below with respect to any Acquisition
Transaction or (iii) participate in any discussions regarding, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to any Acquisition
Transaction. Notwithstanding the immediately preceding sentence, the Company and
its subsidiaries may, prior to the approval of the Merger Agreement by the
Company's stockholders, in response to any unsolicited proposal for an
Acquisition Transaction, furnish information concerning its business, properties
or assets to the corporation, partnership, person or other entity or group (a
"Potential Acquiror") making such proposal for an Acquisition Transaction and
participate in negotiations with the Potential Acquiror if (x) the Company's
Board of Directors after consultation with one or more of its independent
financial advisors, is of the reasonable belief that such Potential Acquiror has
the financial wherewithal to consummate such an Acquisition Transaction, (y) the
Company's Board of Directors reasonably determines, after receiving advice from
the Company's financial advisor, that such Potential Acquiror has submitted a
proposal for an Acquisition Transaction that involves consideration to the
Company's stockholders and other terms that taken as a whole are superior to the
Merger and (z) based upon advice of counsel to such effect, the Company's Board
of Directors determines in good faith that it is necessary to so furnish
information and negotiate in order to comply with its fiduciary duty to
stockholders of the Company. The Merger Agreement provides that in the event the
Company shall determine to provide any information as described above, or shall
receive any offer of the type referred to in this section or shall receive or
become aware of any other proposal to acquire a substantial part of the business
and properties of the Company and its subsidiaries, taken as a whole, or to
acquire a substantial amount of capital stock of the Company, it shall promptly
inform Parent orally as to the fact that information is to be provided and shall
furnish to Parent the identity of the recipient of such information and/or the
proponent of such offer or proposal and a description of the material terms
thereof. The Company is also obligated to keep Parent fully informed of the
status and material details of any proposed Acquisition Transaction or other
transaction (including any material amendments or material proposed amendments
of any such proposed Acquisition Transaction or other transaction).
The Merger Agreement also provides that neither the Board of Directors of
the Company nor any committee thereof (x) shall withdraw or modify or propose to
withdraw or modify, in any manner adverse to Parent, the approval or
recommendation of such Board of Directors or such committee of the Merger
Agreement, the Offer or the Merger or (y) approve or recommend, or propose to
approve or recommend, any proposal for an Acquisition Transaction except, in
each case, in connection with a Superior Proposal. As used herein, the term
"Superior Proposal" means a bona fide proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the Shares then outstanding or all or substantially all the assets of the
Company, provided (i) such proposed transaction satisfies the tests set forth in
clauses (x), (y) and (z) of the second sentence of the immediately preceding
paragraph and (ii) the Board of Directors determines, in its good faith
reasonable judgment, that such proposed transaction is reasonably likely to be
consummated without undue delay.
The Merger Agreement also provides that nothing contained in the preceding
two paragraphs shall prohibit the Company from at any time taking and disclosing
to its stockholders a position contemplated by Rule 14e-2(a) promulgated under
the Exchange Act, provided that neither the Company nor its Board of Directors
shall, except as permitted by the preceding two paragraphs, approve or recommend
acceptance of a proposal for an Acquisition Transaction.
Fees and Expenses. The Merger Agreement provides that the Company will pay,
or cause to be paid, in same day funds to Parent the sum of (x) Parent's
Expenses (as defined below) and (y) $1,750,000 (the "Termination Fee") upon
demand if (i) the Company terminates the Merger Agreement in accordance with the
provision described in paragraph (9) under "Termination of Merger Agreement",
(ii) the Purchaser terminates the Merger Agreement in accordance with the
provisions described in paragraphs (6) or (8) under "Termination of Merger
Agreement" at any time after a proposal for an Acquisition Transaction has been
made or, (iii) the Company or the Purchaser terminates the Merger Agreement in
accordance with the provisions described in paragraphs (2), (3) or (5) under
"Termination of Merger Agreement" at any time after a proposal for an
Acquisition Transaction has been made, and, within twelve (12) months after any
termination referred to in the immediately preceding clauses (ii) or (iii) of
this sentence, any person that made a proposal for an Acquisition Transaction
(or an affiliate thereof) completes a merger, consolidation or other business
combination with the
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Company or a subsidiary of the Company, or the purchase from the Company or from
a subsidiary of the Company of 30% or more (in voting power) of the voting
securities of the Company or of 30% or more (in market value) of the assets of
the Company and its subsidiaries, on a consolidated basis; provided that the
Company will not have any such obligations if the Purchaser terminates the
Merger Agreement in accordance with the provision described in paragraph (6)(ii)
under "Termination of Merger Agreement" as a result of the failure of a
condition to be satisfied unless the reason for the failure of such condition to
be satisfied is reasonably related to the making of such proposal for an
Acquisition Transaction by the person that ultimately consummated a transaction
with the Company. "Expenses" shall mean reasonable and reasonably documented
out-of-pocket fees and expenses incurred or paid by or on behalf of Parent in
connection with the Offer and the Merger or the consummation of any of the
transactions contemplated by the Merger Agreement (including, without
limitation, fees and expenses of counsel, commercial banks, investment banking
firms, accountants, experts and consultants to Parent and any of its
affiliates), provided that all such Expenses for this purpose shall not exceed
$1,000,000 in the aggregate.
Conduct of Business by the Company. The Merger Agreement provides that,
except as otherwise expressly contemplated by the Merger Agreement (including
exceptions on the disclosure schedule thereto) or to the extent that the
Purchaser shall otherwise consent in writing, during the period from the date of
the Merger Agreement to the effective time of the Merger the Company shall not
and shall cause its subsidiaries not to: (a) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock, other than dividends and distributions by a direct or indirect
wholly-owned subsidiary of the Company to its parent; (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock; (c) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities; (d) grant, issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities except upon exercise of any
Stock Option; (e) amend its certificate of incorporation, by-laws or other
comparable organizational documents; (f) acquire or agree to acquire (x) by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, limited
liability company, partnership, joint venture, association or other business
organization or division thereof or (y) any assets or services of any kind other
than (i) pursuant to written purchase orders issued in the ordinary course of
business and in customary amounts consistent with past practices or (ii)
acquisitions of assets or services in the ordinary course of business and in
customary amounts consistent with past practices that, individually, do not
exceed $25,000; (g) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its properties or assets,
other than in the ordinary course of business consistent with past practice,
that are material to the Company and its subsidiaries taken as a whole; (h)
incur any indebtedness, except for borrowings for working capital purposes not
in excess of recent past practice and current lending arrangements; (i) make or
agree to make any new capital expenditure or capital expenditures which in the
aggregate are in excess of $100,000; (j) pay (or commit to pay) any bonus or
other incentive compensation to any officer, director, partner or other employee
or grant (or commit to grant) to any officer, director, partner or employee any
other increase in compensation, except, in the case of employees who are not
executive officers or directors, normal salary increases consistent with recent
practice; (k) (x) enter into, adopt or amend (or commit to enter into, adopt or
amend) any employment, retention, change in control, collective bargaining,
deferred compensation, severance, retirement, bonus, profit-sharing, stock
option or other equity, pension or welfare plan or agreement maintained for the
benefit of any officer, director, partner or employee, except as required by
law, or (y) except as required by agreements set forth on the disclosure
schedule to the Merger Agreement, grant or pay (or commit to grant or pay) any
severance or termination compensation or benefits to any officer, director,
partner or employee; (l) make any tax election inconsistent with past practices
or settle or compromise any material income tax liability; (m) except in the
ordinary course of business or except as would not reasonably be expected to
have a Material Adverse Effect on the Company, modify, amend or terminate any
material contract or agreement to which the Company or any subsidiary is a party
or waive, release or assign any material rights or claims thereunder; (n) make
any material change to its accounting methods, principles or practices, except
as may be required by
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generally accepted accounting principles; or (o) authorize, or commit or agree
to take, any of the foregoing actions.
In addition to the foregoing, the Company has agreed that, except as
expressly contemplated or permitted by the Merger Agreement, it will not take
any action, or permit any of its subsidiaries to take any action, that would, or
that could reasonably be expected to, result in (a) any of the representations
and warranties of the Company set forth in the Merger Agreement that are
qualified as to materiality becoming untrue, (b) any of such representations and
warranties that are not so qualified becoming untrue in any material respect or
(c) any of the conditions to the Merger not being satisfied.
Board of Directors. The Merger Agreement provides that promptly upon the
purchase by the Purchaser of more than 50% of the outstanding Shares on a
fully-diluted basis pursuant to the Offer and from time to time thereafter, the
Company shall use its best efforts to allow the Purchaser to designate up to the
minimum number of directors of the Company necessary in order for the result
(expressed as a fraction) derived by dividing the number of directors so
designated by the total number of directors to be at least equal to the result
(expressed as a fraction) derived by dividing the Shares then held by the
Purchaser by the total number of Shares then outstanding, provided, however,
that until the consummation of the Merger, the Board of Directors of the Company
will have at least two (2) Independent Directors. Subject to applicable law, the
Company has agreed to 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 the Merger Agreement. The term "Independent
Director" means a director who is neither designated by the Purchaser nor
otherwise affiliated with the Parent or the Purchaser and is not an employee of
the Company or any of its subsidiaries.
Stock Options. Pursuant to the Merger Agreement, immediately prior to the
effective time of the Merger, each then outstanding Stock Option, shall be
canceled by the Company in exchange for a payment in cash by the Purchaser (the
"Option Consideration") equal to the product of (i) the number of Shares
previously subject to the Stock Option and (ii) the excess, if any, of the Offer
Price over the exercise price for each Share under such Stock Option. As of the
effective time of the Merger, each holder of a Stock Option will be entitled to
receive only an amount equal to the Option Consideration. All Stock Option
amounts payable shall be subject to any required withholding of taxes and shall
be paid without interest. Pursuant to the Merger Agreement, the Company shall
thereafter cause each stock option or other equity based plan maintained with
respect to any Shares (or rights in respect thereof) to be terminated. The
Merger Agreement provides that the Company shall use its best efforts to cause
each holder of an Option, whether or not then exercisable, to execute an
agreement consenting to the cancellation immediately prior to the Effective Time
of such holder's Options in exchange for such holder's right to receive the
Option Consideration.
Indemnification and Insurance. In the Merger Agreement, Parent and the
Purchaser have agreed that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the effective time of
the Merger now existing in favor of the current or former directors, officers
employees or agents of the Company and its subsidiaries or any Person who is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, as provided in their respective certificates of incorporation,
by-laws (or comparable organizational documents) and indemnification agreements
shall survive the Merger and shall continue in full force and effect in
accordance with their terms. Pursuant to the Merger Agreement, Parent will cause
to be maintained for a period of not less than six (6) years from the effective
time of the Merger the Company's current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to such effective time ("D&O Insurance") for all persons who are
directors and officers of the Company on the date of the Merger Agreement, so
long as the annual premium therefor would not be in excess of 250% of the last
annual premium paid prior to the date of the Merger Agreement (the "Maximum
Premium"); provided, however, that if the annual premium therefor would exceed
the Maximum Premium, Parent shall purchase as much coverage as is available for
the Maximum Premium; provided further, that Parent may, in lieu of maintaining
such existing D&O Insurance as provided above, cause coverage to be provided
under any policy maintained for the benefit of Parent or any of its subsidiaries
or any policy specifically obtained for this purpose, so long as the terms
thereof are no less advantageous to the intended beneficiaries thereof than the
existing D&O Insurance for a period of not less
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<PAGE> 25
than six (6) years from the effective time of the Merger. If the existing D&O
Insurance expires, is terminated or canceled during such six (6) year period,
Parent has agreed to obtain as much D&O Insurance as can be obtained for the
remainder of such period for an annualized premium equal to the Maximum Premium,
on terms and conditions no less advantageous to the covered persons than the
existing D&O Insurance.
Reasonable Best Efforts. The Merger Agreement provides that, except as
otherwise contemplated therein, Parent, the Purchaser and the Company each shall
use their reasonable best efforts to take promptly, or cause to be taken, all
actions and to do promptly, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by the
Merger Agreement, including using their reasonable best efforts (i) to obtain
all necessary waivers, consents and approvals, and (ii) to effect all necessary
registrations and filings, subject, however, to the approval of the Company's
stockholders. In case at any time after the effective time of the Merger any
further action is necessary or desirable to carry out the obligations of the
parties under the Merger Agreement, the proper officers and/or directors of
Parent, the Purchaser and the Company, as the case may be, shall take the
necessary action.
Specifically, Parent, Purchaser and the Company have agreed to use their
reasonable best efforts to make promptly any required submissions under the HSR
Act with respect to the Offer, the Merger and the transactions contemplated by
the Merger Agreement. The Company has agreed to use its reasonable best efforts
to obtain all consents, approvals, permits or authorizations as are required to
be obtained from other parties to loan agreements or other contracts material to
the Company's business in connection with the consummation of the Merger.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
THE STOCKHOLDERS AGREEMENT
Pursuant to the terms and conditions of the Stockholders Agreement, each
Selling Stockholder has agreed to tender his Shares in the Offer.
In the Stockholders Agreement, each Selling Stockholder has further agreed
that, until the Termination Date (as defined below), such Selling Stockholder
will vote his Shares (i) 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
Stockholders Agreement and any actions required in furtherance thereof; (ii)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement, the Offer or the Stockholders Agreement; and (iii)
except as specifically requested in writing by Parent in advance, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or its subsidiaries or a reorganization, recapitalization,
dissolution, liquidation or winding up of the Company or any of its
subsidiaries; (C) any change in the Board of Directors of the Company; (D) any
change in the present capitalization of the Company or any amendment of the
Company's Certificate of Incorporation; (E) any other material change in the
Company's corporate structure or business; and (F) any other action which is
intended or could reasonably be expected to impede, interfere with, delay,
postpone, discourage or materially adversely affect the Merger, the transactions
contemplated by the Merger Agreement or the Stockholders Agreement or the
contemplated economic benefits of any of the foregoing.
In addition, subject to his obligations as a director or officer of the
Company, to the extent permitted by the Merger Agreement, each Selling
Stockholder has agreed that he shall not, directly or indirectly (including
through advisors, agents or other intermediaries), initiate, solicit, negotiate,
encourage or provide confidential information to facilitate any proposal or
offer by any Person that constitutes or could reasonably be expected to lead to
an Acquisition Transaction. If such Selling Stockholder receives any such
inquiry or proposal, then such Selling Stockholder shall promptly inform Parent
of the terms and conditions, if any, of such inquiry or proposal and the
identity of the person making it. The Selling Stockholders have also agreed to
immediately cease and
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<PAGE> 26
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing.
Under the Stockholders Agreement, each Selling Stockholder has also granted
the Purchaser an irrevocable option to purchase such Selling Stockholder's
Shares, including all Shares subject to all Stock Options owned by such Selling
Stockholder, in each case at the Offer Price per Share. In the case of all
Shares underlying all such Stock Options (the "Option Shares"), such option may
be exercised by the Purchaser at any time and from time to time following the
earlier to occur of its purchase of any Shares pursuant to the Offer and any
time when the Merger Agreement is terminated in accordance with its terms. In
the case of all other Shares held by the Selling Stockholders, such option may
be exercisable by the Purchaser at any time, and from time to time, following
any time the Merger Agreement is terminated in accordance with its terms. Among
other things, this option may facilitate the Purchaser's ability to acquire 50%
of the outstanding Shares and may enable the Purchaser to sell all of such
Shares subject to such option to any person who has made and consummates a
Superior Proposal.
The Stockholders Agreement shall terminate upon the earlier of (a) the
effective time of the Merger, (b) if (i) the Company terminates the Merger
Agreement pursuant to paragraph 9 above under "Termination of the Merger
Agreement, (ii) the Purchaser terminates the Merger Agreement pursuant to
paragraphs 6 or 8 above under "Termination of the Merger Agreement" at any time
after a proposal for an Acquisition Transaction has been made or (iii) the
Company or the Purchaser terminates the Merger Agreement pursuant to paragraphs
2, 3 or 5 above under "Termination of the Merger Agreement" at any time after a
proposal for an Acquisition Transaction has been made, twelve (12) months after
any such termination, provided, however, that if the Purchaser has exercised the
option pursuant to Stockholders Agreement described above prior to such date but
has not closed the purchase of the Shares and/or Option Shares subject to such
option prior to such date, the Stockholders Agreement shall terminate
immediately after the date of such closing, and (c) if the Merger Agreement is
terminated under any circumstances not mentioned in clause (b) of this
paragraph, the date the Merger Agreement is terminated.
13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, prior to the effective time
of the merger, unless otherwise approved in writing by the Purchaser, the
Company may not (a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly-owned subsidiary of
the Company to its parent, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities or (b) grant, issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock, any
other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities, except upon exercise of any Option. Nothing herein shall
constitute a waiver by the Purchaser or Parent of any of its rights under the
Merger Agreement or a limitation of remedies available to the Purchaser or
Parent for any breach of the Merger Agreement, including termination thereof.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment, or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered shares after the termination or withdrawal of the Offer), to pay
for any Shares tendered pursuant to the Offer, and (subject to the terms of the
Merger Agreement) may amend or terminate the Offer or postpone the acceptance
for payment, the purchase of, and/or (subject to any such applicable rules and
regulations of the Commission) payment for, Shares tendered, (i) unless there
are validly tendered and not properly withdrawn prior to the expiration of the
Offer at least that number of Shares which represents in excess of 50% of all
outstanding Shares on a fully-diluted basis (such basis assumes all Shares
underlying vested and unvested stock options are issued and outstanding), or
(ii) if at any time on or after the date of the Merger Agreement and at or
before the time of payment for any such Shares
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<PAGE> 27
(whether or not any Shares shall theretofore have been accepted for payment or
paid pursuant to the Offer) any of the following conditions exists:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding
before any federal or state court or governmental, administrative or
regulatory authority or agency, located or having jurisdiction within the
United States or any country or economic region in which either the Company
or Parent, directly or indirectly, has material assets or operations, or
any other action taken, proposed or threatened, or statute, rule,
regulation, legislation, interpretation, judgment or order proposed,
sought, enacted, entered, promulgated, amended or issued that is applicable
to Purchaser, the Company or any subsidiary or affiliate of Purchaser or
the Company or the Offer or the Merger, by any legislative body, court,
government or governmental, administrative or regulatory authority or
agency located or having jurisdiction within the United States or any
country or economic region in which either the Company or Parent, directly
or indirectly, has material assets or operations, which could reasonably be
expected to have the effect of: (i) making illegal, or otherwise
restraining or prohibiting or making materially more costly, the making of
the Offer, the acceptance for payment of, payment for, or ownership,
directly or indirectly, of some of or all the Shares by Parent or
Purchaser, the consummation of any of the transactions contemplated by the
Merger Agreement or materially delaying the Merger; (ii) prohibiting or
materially limiting the ownership or operation by the Company or any of its
subsidiaries, or by Parent, Purchaser or any of Parent's subsidiaries of
all or any material portion of the business or assets of the Company and
its subsidiaries taken as a whole or Parent or any of its subsidiaries, or
compelling Purchaser, Parent or any of Parent's subsidiaries to dispose of
or hold separate all or any material portion of the business or assets of
the Company and any of its subsidiaries taken as a whole or Parent or any
of its subsidiaries, in each case as a result of the transactions
contemplated by the Offer or the Merger Agreement; (iii) imposing or
confirming material limitations on the ability of Purchaser, Parent or any
of Parent's subsidiaries effectively to acquire or hold or to exercise full
rights of ownership of Shares including, without limitation, the right to
vote any Shares acquired or owned by Parent or Purchaser or any of Parent's
subsidiaries on all matters properly presented to the stockholders of the
Company, including, without limitation, the adoption and approval of the
Merger Agreement and the Merger or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company; (iv)
requiring divestiture by Parent or Purchaser, directly or indirectly, of
any Shares; or (v) which could reasonably be expected to materially
adversely affect the business, financial condition or results of operations
of the Company and its subsidiaries taken as a whole or the value of the
Shares or of the Offer to Purchaser or Parent;
(b) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
decline of at least 25% in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 index from that existing at the close
of business on the date hereof, (iii) any material adverse change or any
condition, event or development involving a prospective material adverse
change in United States or other material international currency exchange
rates or a suspension of, or limitation on, the markets therefor, (iv) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (v) any limitation (whether or not
mandatory) by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign on, or any other event that
materially adversely affects, the extension of credit by banks or other
lending institutions, (vi) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving
the United States which would reasonably be expected to have a Material
Adverse Effect on the Company or materially adversely affect (or materially
delay) the consummation of the Offer or (vii) in the case of any of the
foregoing existing at the time of the execution of the Merger Agreement, a
material acceleration or worsening thereof which acceleration or worsening
is reasonably expected to have a Material Adverse Effect on the Company or
to materially adversely affect the consummation of the Offer;
(c) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the outstanding Shares has been acquired by any
corporation (including
25
<PAGE> 28
the Company or any of its subsidiaries or affiliates), partnership, person
or other entity or group (as defined in Section 13(d)(3) of the Exchange
Act), other than Parent or any of its affiliates, or (ii) (A) the Board of
Directors of the Company or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent or Purchaser the approval or
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any takeover proposal or any other acquisition of
Shares other than the Offer and the Merger, (B) any such corporation,
partnership, person or other entity or group shall have entered into a
definitive agreement or an agreement in principle with the Company with
respect to a tender offer or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the Company
or any of its subsidiaries or (C) the Board of Directors of the Company or
any committee thereof shall have resolved to do any of the foregoing;
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made at the time of
such determination, except with respect to representations and warranties
made as of an earlier time;
(e) the Company shall have failed to perform any material obligation
or to comply with any material agreement or material covenant of the
Company to be performed or complied with by it under the Merger Agreement;
(f) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company; or
(g) any waiting periods under the HSR Act applicable to the purchase
of Shares pursuant to the Offer shall not have expired or been terminated
or any material approval, permit, authorization, consent or waiting period
of any domestic, foreign or supranational governmental, administrative or
regulatory agency (federal, state, local, provincial or otherwise) located
or having jurisdiction within the United States or any country or economic
region in which either the Company or Parent, directly or indirectly, has
material assets or operations, shall not have been obtained and such
failure to obtain could reasonably be expected to have a Material Adverse
Effect on the Company or the value of the Shares or the Offer to the
Purchaser;
which, in the good faith sole judgment of Purchaser makes it inadvisable to
proceed with the Offer or with such acceptance for payment of or payment for
Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser in whole or in part at any time and from
time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company and discussions of representatives
of Parent with representatives of the Company, none of the Purchaser, Parent or
General Chemical Group is aware of any license or regulatory permit that appears
to be material to the business of the Company and its subsidiaries, taken as a
whole, that might be adversely affected by the Purchaser's acquisition of Shares
(and the indirect acquisition of the stock of the Company's subsidiaries) as
contemplated herein or of any approval or other action by any Governmental
Entity that would be required or desirable for the acquisition or ownership of
Shares by the Purchaser as contemplated herein. Should any such approval or
other action be required or desirable, the Purchaser and Parent currently
contemplate that such approval or other action will be sought, except as
described below under "Other State Takeover Laws". While, except as otherwise
expressly described in this Section 15, the Purchaser does not presently intend
to delay the acceptance for payment of or payment for
26
<PAGE> 29
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of if such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 hereof.
Ohio Control Bid Statute. Sections 1707.041, 1707.42, 1707.23 and 1707.26
of the Ohio Revised Code (collectively, the "Ohio Control Bid Statute") regulate
tender offers. The Ohio Control Bid Statute applies to the purchase of or offer
to purchase an equity security of a subject company from a resident of Ohio if,
after the purchase, the offeror would directly or indirectly be the beneficial
owner of more than ten percent (10%) of any class of issued and outstanding
equity securities of the Company (a "control bid"). A subject company includes
an issuer, such as the Company, that (i) either has its principal place of
business or principal executive offices located in Ohio or owns or controls
assets located in Ohio that have a fair market value of at least one million
dollars, and (ii) has more than 10% of its beneficial or record equity security
holders resident in Ohio, or has more than 10% of its equity securities owned,
beneficially or of record, by residents of Ohio, or has more than one thousand
beneficial or record equity security holders who reside in Ohio. A subject
company, however, need not be incorporated in Ohio.
The Ohio Control Bid Statute prohibits an offeror from making a control bid
for securities of a subject company pursuant to a tender offer until the offeror
has filed specified information with the Ohio Division of Securities (the "Ohio
Division"). In addition, the offeror is required to deliver a copy of such
information to the subject company not later than the offeror's filing with the
Ohio Division and to send or deliver such information and the material terms of
the proposed offer to all offerees in Ohio as soon as practicable after the
offeror's filing with the Ohio Division.
Within five calendar days of such filing, the Ohio Division may by order
summarily suspend the continuation of the control bid if it determines that the
offeror has not provided all of the specified information or that the control
bid materials provided to offerees do not provide full disclosure of all
material information concerning the control bid. If the Ohio Division summarily
suspends a control bid, it must schedule and hold a hearing within ten calendar
days of the date on which the suspension is imposed and must make its
determination within three calendar days after the hearing has been completed
but no later than fourteen calendar days after the date on which the suspension
is imposed. The Ohio Division may maintain its suspension of the continuation of
the control bid if, based upon the hearing, it determines that all of the
information required to be provided by the Ohio Control Bid Statute has not been
provided by the offeror, that the control bid materials provided to offerees do
not provide full disclosure of all material information concerning the control
bid, or that the control bid is in material violation of any provision of the
Ohio securities laws. If, after the hearing, the Ohio Division maintains the
suspension, the offeror has the right to correct the disclosure and other
deficiencies identified by the Ohio Division and to reinstitute the control bid
by filing new or amended information pursuant to the Ohio Control Bid Statute.
Parent and the Purchaser have submitted documents required by the Ohio
Control Bid Statute, including a copy of the Schedule 14D-1 relating to the
Offer, to the Ohio Division.
Section 203 of the DGCL. Section 203 of the DGCL, in general, prohibits a
Delaware corporation such as the Company from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers, as set
forth below) with an "Interested Stockholder" (defined generally as a person
that is the beneficial owner of 15% or more of a corporation's outstanding
voting stock) for a period of three years following the date that such person
became an Interested Stockholder unless, among other things, prior to the date
such person became an Interested Stockholder, the board of directors of the
corporation approved either the Business Combination or the transaction that
resulted in the stockholder becoming an Interested Stockholder. The Company's
Board of Directors has approved the Merger Agreement, the Stockholders Agreement
and the Purchaser's acquisition of Shares pursuant to the Offer and the
Stockholders Agreement. Therefore, Section 203 of the DGCL is inapplicable to
the Merger.
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<PAGE> 30
Other State Takeover Laws. A number of states throughout the United States
have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, stockholders, executive offices or places of
business in such states. In Edgar v. MITE Corp., the Supreme Court of the United
States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions.
Subsequently, a number of Federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
Based on information supplied by the Company, the Purchaser does not
believe that any other state takeover statutes purport to apply to the Offer or
the Merger. Except as discussed above, neither the Purchaser nor Parent has
currently complied with any state takeover statute or regulation. The Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, the Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and the Purchaser might
be unable to accept for payment or pay for Shares tendered pursuant to the
Offer, or be delayed in consummating the Offer or the Merger. In such case, the
Purchaser may not be obligated to accept payment or pay for any Shares tendered
pursuant to the Offer. See Section 14 hereof.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by General
Chemical Group of a Notification and Report Form with respect to the Offer,
unless General Chemical Group or the Company receives a request for additional
information or documentary material from the Antitrust Division or the FTC or
unless early termination of the waiting period is granted. General Chemical
Group filed its Notification and Report Form with respect to the Offer on
January 8, 1999. The Company expects to file its Notification and Report Form
soon. If, within the initial 15-day waiting period, either the Antitrust
Division or the FTC requests additional information or material from General
Chemical Group or the Company concerning the Offer, the waiting period will be
extended and would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by General Chemical Group
or the Company with such request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of General Chemical Group and the Company. The waiting period under the
HSR Act may be terminated prior to its expiration by the FTC and the Antitrust
Division. General Chemical Group will request early termination of the waiting
period, although there can be no assurance that this request will be granted. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or the
FTC raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. Expiration or
termination of the applicable waiting period under the HSR Act is a condition to
the Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of
28
<PAGE> 31
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Purchaser or the divestiture of
substantial assets of the Company or its subsidiaries or General Chemical Group
or its subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
APPRAISAL RIGHTS
Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, holders of Shares at the effective time
of the Merger will have certain rights pursuant to the provisions of Section 262
of the DGCL ("Section 262") to dissent and demand appraisal of their Shares.
Under Section 262, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such fair
value in cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of Shares could be based upon factors other
than, or in addition to, the price per Share to be paid in the Merger or the
market value of the Shares. The value so determined could be more or less than
the price per Share to be paid in the Merger.
The foregoing summary of Section 262 does not purport to be complete and is
qualified in its entirety by reference to Section 262. FAILURE TO FOLLOW THE
STEPS REQUIRED BY SECTION 262 FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE
LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions. The Purchaser does not
believe that Rule 13e-3 will be applicable to the Merger unless the Merger is
consummated more than one year after the termination of the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the fairness of the Merger and the consideration offered
to minority stockholders in such transaction be filed with the Commission and
disclosed to stockholders prior to the consummation of the Merger.
16. FEES AND EXPENSES
The Purchaser and Parent have retained Georgeson & Company Inc., Inc. to
act as the Information Agent and American Stock Transfer & Trust Company to
serve as the Depositary in connection with the Offer. The Information Agent and
the Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the Federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the customary compensation payable
to the Information Agent) in connection with the solicitation of tenders of
Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will
be reimbursed by the Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. None of the Purchaser, Parent or General Chemical Group is aware
of any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. To the extent the
Purchaser, Parent or General Chemical Group becomes aware of any state law that
would limit the class of offerees in the Offer, the Purchaser will amend the
Offer and, depending on the timing of such amendment, if any, will extend the
Offer to provide adequate dissemination of such information to holders of Shares
prior to the expiration of the Offer. In any jurisdiction the securities, blue
sky or other laws of which
29
<PAGE> 32
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER, PARENT OR GENERAL CHEMICAL GROUP NOT
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser, Parent and General Chemical Group have filed with the
Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act,
together with exhibits, furnishing certain additional information with respect
to the Offer, and may file amendments thereto. In addition, the Company has
filed the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together
with exhibits, setting forth its recommendation with respect to the Offer and
the reasons for such recommendation and furnishing certain additional related
information. Such Schedules and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable in the manner
set forth in Sections 8 and 9 (except that such material will not be available
at the regional offices of the Commission).
DN ACQUISITION CORPORATION
January 13, 1999
30
<PAGE> 33
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF GENERAL CHEMICAL GROUP,
PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF GENERAL CHEMICAL GROUP. The
following table sets forth the name and current principal occupation or
employment of the directors and executive officers of General Chemical Group.
Unless otherwise indicated, all occupations, offices or positions of employment
listed opposite an individual's name were held by such individual during the
last five years. The business address of each such director and executive
officer is c/o General Chemical Group, Liberty Lane, Hampton, NH 03842. All such
directors and executive officers listed below are citizens of the United States.
Directors are indicated by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
---- ------------------
<S> <C>
Philip E. Beekman* Mr. Beekman has been a director of General Chemical Group
since 1996. He has been President of Owl Hollow
Enterprises (consulting and investment) since prior to
1993 and was Chairman of the Board and Chief Executive
Officer of Hook-SupeRx, Inc. (retail) from prior to 1993
to 1994. Mr. Beekman is also a director of BT Office
Products International, Inc., Linens 'n Things Inc.,
Consolidated Cigar Corp. and Kendle International Inc.
Gerald J. Lewis* Judge Lewis has been a director of General Chemical Group
since 1996. He has been Chairman of Lawsuit Resolution
Services since 1997 and was of counsel of the law firm of
Latham & Watkins from prior to 1993 to 1997.
Paul M. Meister* Mr. Meister has been Vice Chairman of the Board of General
Chemical Group since 1998 and a director since 1996. Mr.
Meister has been Vice Chairman of the Board and Executive
Vice President of Fisher Scientific International Inc.
("Fisher") (medical equipment and supplies distributor)
since March 1998, Chief Financial Officer of Fisher since
prior to 1993 and Senior Vice President from prior to 1993
to 1998. Mr. Meister was Senior Vice President of Abex
Inc. (aerospace products and services) ("Abex") from prior
to 1993 to 1995. Mr. Meister is also a director of
Minerals Technologies Inc. and M&F Worldwide Corp.
Paul M. Montrone* Mr. Montrone, Chairman of the Board since 1994, has been a
director of General Chemical Group since prior to 1993 and
was President from prior to 1993 to 1994. Mr. Montrone has
been Chairman of the Board of Fisher since March 1998,
Chief Executive Officer and a director of Fisher since
prior to 1993 and was President from prior to 1993 to
1998. Mr. Montrone was Vice Chairman of Abex from prior to
1993 until June 1995. Mr. Montrone is also a director of
USA Waste Management Inc.
Richard R. Russell* Mr. Russell has been President and Chief Executive Officer
and a director of General Chemical Group since 1994. Mr.
Russell has been President and Chief Executive Officer and
a director of General Chemical Corporation ("GCC") since
prior to 1993.
</TABLE>
S-1
<PAGE> 34
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
---- ------------------
<S> <C>
Scott M. Sperling* Mr. Sperling has been a Managing Director of Thomas H. Lee
Company (private equity investment firm) since September
1994. He is also Vice President and Trustee of THL Equity
Trust III, the general partner of Equity Advisors III
Limited Partnership, which is the general partner of
Thomas H. Lee Equity Fund III, L.P. Mr. Sperling was
Managing Partner of Aeneas Group, a private capital
affiliate of Harvard Management Company from prior to 1993
to September 1994. Mr. Sperling is also a director of The
Learning Company, Livent, Inc., Fisher, PriCellular, Inc.,
Safelite Glass Corp. and several private corporations.
Ira Stepanian* Mr. Stepanian was Chairman and Chief Executive Officer of
Bank of Boston Corporation and its principal subsidiary,
The First National Bank of Boston from prior to 1993 until
1995.
John W. Gildea* Mr. Gildea has been Managing Director of Gildea Management
Company (investment management firm) since prior to 1993.
Mr. Gildea is also a director of FAC Realty Trust, Inc.,
American Service Group, Inc. and Barry's Jewelers, Inc.
Ralph M. Passino Mr. Passino has been Vice President and Chief Financial
Officer of General Chemical Group since 1994. Mr. Passino
has been Chief Financial Officer and Vice President of
Administration of General Chemical Group since prior to
1993 and director since 1994.
DeLyle W. Bloomquist Mr. Bloomquist has been Vice President and General
Manager -- Industrial Chemicals of GCC since 1996, and was
Director of Corporate Distribution of GCC from 1995 to
1996. He served as Controller -- Industrial Chemicals of
GCC from prior to 1993 to 1995.
Bodo B. Klink Mr. Klink has been Vice President -- Business Development of
GCC since 1996, and was Vice President of Marketing from
prior to 1993 to 1996.
James N. Tanis Mr. Tanis has been Vice President and General
Manager -- Derivative Products and Services of GCC since
prior to 1994.
James A. Wilkinson Mr. Wilkinson has been Vice President of Manufacturing of
GCC since prior to 1993.
</TABLE>
S-2
<PAGE> 35
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The following table
sets forth the name and current principal occupation or employment of the
directors and executive officers of the Purchaser. The business address of each
such director and executive officer is c/o General Chemical Group, Liberty Lane,
Hampton, NH 03842. All such directors and executive officers listed below are
citizens of the United States. Directors are indicated by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
---- ----------------------------
<S> <C>
Richard R. Russell* See page S-1.
Todd M. DuChene* Mr. DuChene has been Vice President, General Counsel and
Secretary of Fisher since 1996, Vice President of Latona
Associates, Inc. and Secretary of General Chemical Group
since 1998. Previously, he was Senior Vice President,
General Counsel and Secretary of Officemax, Inc. from 1995
to 1996 and Vice President, General Counsel and Assistant
Secretary from 1994 to 1995. Prior to joining Officemax,
Inc., Mr. DuChene was an associate with Baker and
Hostetler from prior to 1993.
Paul M. Meister* See page S-1.
Michael R. Herman Mr. Herman has been Vice President and General Counsel of
GCC since 1997, was Associate General Counsel from 1995 to
1997 and Deputy General Counsel from prior to 1993 to
1995.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and current principal occupation or employment of the directors
and executive officers of Parent. Unless otherwise indicated, all occupations,
offices or positions of employment listed opposite an individual's name were
held by such individual during the last five years. The business address of each
such director and executive officer is c/o General Chemical Group, Liberty Lane,
Hampton, NH 03842. All such directors and executive officers listed below are
citizens of the United States. Directors are indicated by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
---- ------------------
<S> <C>
Richard R. Russell* See page S-1.
Ralph M. Passino* See page S-2.
Michael R. Herman See above.
</TABLE>
S-3
<PAGE> 36
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at its address set forth below.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
<TABLE>
<S> <C>
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
40 Wall Street (718) 234-5001
46th Floor
New York, New York 10005 Confirm by Telephone:
(718) 921-8200
</TABLE>
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its telephone numbers and
location listed below. You may also contact your broker, dealer, bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
All Others Call Toll Free (800) 223-2064
<PAGE> 1
Exhibit 11(a)(2)
STOCKHOLDERS WISHING TO TENDER THEIR SHARES SHOULD USE THIS LETTER OF
TRANSMITTAL.
LETTER OF TRANSMITTAL
TO
TENDER SHARES OF COMMON STOCK
OF
DEFIANCE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 13, 1999
BY
DN ACQUISITION CORPORATION
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
THE GENERAL CHEMICAL GROUP INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, FEBRUARY 11, 1999 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C>
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
40 Wall Street (718) 234-5001
46th Floor
New York, New York 10005 Confirm by Telephone:
(718) 921-8200
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
SIGNATURES MUST BE PROVIDED ON PAGES 6 AND 10 WITHIN. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined in Section 2 of the Offer to Purchase (as defined
below)) is utilized, if a tender of Shares is to be made by book-entry transfer
into the account of American Stock Transfer & Trust Company as Depositary (the
"Depositary"), at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 2 of the Offer to
Purchase (as defined below). Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Depositary.
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot complete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase. See Instruction 2.
<PAGE> 2
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO
AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:__________________________________________
Account Number:_________________________________________________________
Transaction Code Number:________________________________________________
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED
DELIVERY.
Name(s) of Registered Holder(s):________________________________________
Window Ticket Number (if any):__________________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________
Name of Institution which Guaranteed Delivery:__________________________
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares represented by
certificates delivered to the Depositary are being tendered. See Instruction
4.
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to DN Acquisition Corporation, a Delaware
corporation ("Purchaser") and an indirect wholly-owned subsidiary of The General
Chemical Group Inc., a Delaware corporation, the above-described shares of
common stock, par value $0.05 per Share (all of the shares of common stock being
hereinafter collectively referred to as the "Shares"), of Defiance, Inc., a
Delaware corporation (the "Company"), at a purchase price of $9.50 per Share,
net to the seller in cash without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated January 13, 1999
(the "Offer to Purchase") and in this Letter of Transmittal (which together with
the Offer to Purchase, constitutes the "Offer"). The undersigned understands
that Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all of the Shares
that are being tendered hereby and any and all dividends, distributions
(including additional Shares) and rights declared, paid or issued with respect
to the tendered Shares on or after January 7, 1999 and payable or distributable
to the undersigned on a date prior to the transfer to the name of Purchaser (or
nominee or transferee of Purchaser) on the Company's stock transfer records of
the Shares tendered herewith (collectively, a "Distribution"), and irrevocably
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions) with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to (a) deliver
certificates for such Shares (and any Distributions) or transfer ownership of
such Shares (and any Distributions) on the account books maintained by the
Book-Entry Transfer Facility, together in either case with appropriate evidences
of transfer, to the Depositary for the account of Purchaser, (b) present such
Shares (and any Distributions) for transfer on the books of the Company and (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares (and any Distributions), all in accordance with the terms and
subject to the conditions of the Offer.
The undersigned irrevocably appoints Purchaser or any other designees of
Purchaser, and each of them, as such stockholder's attorneys-in-fact and
proxies, each with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by Purchaser and with respect to any and all other shares
or other securities issued or issuable in respect of such Shares on or after
January 7, 1999. Such appointment will be effective upon the acceptance for
payment of such Shares by Purchaser in accordance with the terms of the Offer.
Upon such acceptance for payment, all prior powers of attorney and proxies given
by such stockholder with respect to such Shares (and such other shares and
securities) will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consents executed (and, if given or
executed, will not be deemed effective). The proxies (or other designees of
Purchaser) will be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders or any adjournment or postponement
thereof, by consent in lieu of any such meeting or otherwise. Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon Purchaser's payment for such Shares Purchaser must be able to
exercise full voting rights with respect to such Shares.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distributions) tendered hereby and (b) when the Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title to the Shares (and any Distributions), free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned, upon request, shall execute and deliver any
signature guarantee or additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares (and any Distributions) tendered hereby. In addition, the
undersigned shall promptly remit and transfer to the Depositary for the account
of Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, Purchaser will be, subject to
applicable law,
3
<PAGE> 4
entitled to all rights and privileges as owner of any such Distribution and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred by this Letter of
Transmittal shall be affected by, and all such authority shall survive the death
or incapacity of the undersigned. All obligations of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, trustees in
bankruptcy, personal and legal representatives, successors and assigns of the
undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) and, unless
theretofore accepted for payment by Purchaser pursuant to the Offer, may also be
withdrawn at any time after March 14, 1999. See Section 3 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation and warranty that the
undersigned owns the Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificate(s)
for Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated herein under "Special Delivery
Instructions," please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. Unless otherwise indicated herein under "Special Payment
Instructions," please credit any Shares tendered herewith by book-entry transfer
that are not accepted for payment by crediting the account designated above. The
undersigned recognizes that Purchaser has no obligation, pursuant to the Special
Payment Instructions, to transfer any Shares from the name(s) of the registered
holder(s) thereof if Purchaser does not accept for payment any of the Shares so
tendered.
4
<PAGE> 5
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING THE SHARES THAT YOU
OWN HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of shares represented by the lost or destroyed certificates:
Please fill in the remainder of this Letter of Transmittal.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) To be completed ONLY if certificate(s)
for Shares not tendered or not accepted for for Shares not tendered or not accepted for
payment and/or the check for the purchase payment and/or the check for the purchase
price of Shares accepted for payment are to price of Shares accepted for payment are to
be issued in the name of someone other than be sent to someone other than the
the undersigned or if Shares tendered by undersigned or to the undersigned at an
book-entry transfer which are not accepted address other than that shown above.
for payment are to be returned by credit to
an account maintained at the Book-Entry
Transfer Facility other than the account
shown above.
Issue [ ] Check [ ] Certificates to: Mail [ ] Check [ ] Certificates to:
Name: Name:
----------------------------------------- -----------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address: Address:
--------------------------------------- ---------------------------------------
-------------------------------------------- --------------------------------------------
-------------------------------------------- --------------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY
NO.) NO.)
(SEE SUBSTITUTE FORM W-9 ON BACK COVER) (SEE SUBSTITUTE FORM W-9 ON BACK COVER)
-------------------------------------------- --------------------------------------------
Credit Shares tendered by book-entry
transfer that are not accepted for payment
to:
--------------------------------------------
(ACCOUNT NUMBER)
</TABLE>
5
<PAGE> 6
IMPORTANT:
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9)
X
- --------------------------------------------------------------------------------
: Sign
X
- --------------------------------------------------------------------------------
: Here
SIGNATURE(S) OF HOLDER(S)
Dated:
- ---------------------------------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holders(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( )
- --------------------------------------------------------------------
(AREA CODE)
Tax Identification or Social Security No.:
- ----------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S))
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( )
- --------------------------------------------------------------------
(AREA CODE)
Dated:
- ---------------------------------------------
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares (which term, for purposes of this document, shall
include any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Shares) tendered herewith, unless
such holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" above, or (b)
if such Shares are tendered for the account of a firm which is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of a recognized Medallion Program approved by the Securities
Transfer Association (each of the foregoing being referred to as an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5 of this Letter
of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by stockholders either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if tenders are to be made pursuant to the
procedure for tender by book-entry transfer set forth in Section 2 of the Offer
to Purchase. Certificates for all physically tendered Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer Facility, as
well as a properly completed and duly executed Letter of Transmittal (or a
facsimile hereof), with any required signature guarantees, or an Agent's Message
in connection with a book-entry transfer, and any other documents required by
this Letter of Transmittal, must be received by the Depositary at its address
set forth herein prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase).
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates for Shares and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 2 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser, must be received by the Depositary on or prior to the
Expiration Date; and (iii) the certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer, in each case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in the
case of a book-entry delivery, an Agent's Message) and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq Stock Market trading days after the date of execution of
such Notice of Guaranteed Delivery.
TENDERING STOCKHOLDERS SHOULD USE THIS LETTER OF TRANSMITTAL (AND, IF
NECESSARY, THE GRAY NOTICE OF GUARANTEED DELIVERY PROVIDED WITH THE OFFER TO
PURCHASE). STOCKHOLDERS WILL BE ABLE TO TENDER (OR WITHDRAW) THEIR SHARES
PURSUANT TO THE OFFER UNTIL 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 11,
1999 (OR SUCH LATER DATE TO WHICH THE OFFER MAY BE EXTENDED).
THE METHOD OF DELIVERY OF STOCK CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
7
<PAGE> 8
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Number of Shares Tendered." In such cases, new
certificates for the Shares that were evidenced by your old certificates, but
which were not tendered by you, will be sent to you, unless otherwise provided
in the appropriate box on this Letter of Transmittal, as soon as practicable
after the Expiration Date. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to Purchaser of their authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or not purchased are to be issued in the
name of, a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates and stock powers must be guaranteed by an
Eligible Institution, unless the signature is that of an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay any stock transfer taxes with respect to the purchase of
Shares pursuant to the Offer. If, however, payment of the purchase price is to
be made to, or if certificate(s) for Shares not tendered or accepted for payment
are to be registered in the name of, any person other than the registered
owner(s), or if tendered certificate(s) are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered owner(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes, or an
exemption therefrom, is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed. A stockholder who tenders
by book-entry transfer may request that Shares not accepted for payment be
credited to such account maintained at the Book-Entry Transfer Facility as such
stockholder may designate under "Special Payment Instructions." If no such
instructions are given, such Shares not accepted for payment will be returned by
crediting the account designated above.
8
<PAGE> 9
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Purchaser in whole or in part at any time and from time to time in its sole
discretion, subject to the terms of the Agreement and Plan of Merger, dated as
of January 7, 1999, among Defiance, Inc., DN Acquisition Corporation and New
Hampshire Oak, Inc.
9. BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal income tax
law, a stockholder whose tendered Shares are accepted for payment is required to
provide the Depositary with such stockholder's correct taxpayer identification
number ("TIN"), generally the stockholder's social security or federal employer
identification number, and certain other information, on Substitute Form W-9
below. If the Depositary is not provided with the correct TIN, the Internal
Revenue Service may subject the stockholder or other payee to a $50 penalty. In
addition, payments that are made to such stockholder or other payee with respect
to Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Information Agent at the address and
telephone numbers set forth below. Additional copies of the Offer to Purchase,
this Letter of Transmittal and the Notice of Guaranteed Delivery may also be
obtained from the Information Agent or from brokers, dealers, commercial banks
or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding special
payment/special delivery instructions and indicating the number of Shares lost.
The stockholder will then be instructed as to the steps that must be taken in
order to replace the certificate. This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH STOCK CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF
GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
9
<PAGE> 10
TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS
(SEE INSTRUCTION 9)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY, AS DEPOSITARY
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN ---------------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY Social Security Number
DEPARTMENT OF THE TREASURY BY SIGNING AND DATING BELOW or
INTERNAL REVENUE SERVICE ---------------------------------
PAYER'S REQUEST FOR Employer ID number
TAXPAYER IDENTIFICATION
NUMBER ("TIN")
- -------------------------------------------------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be
issued to me) and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding you received another notification from
the IRS that you are no longer subject to backup withholding, do not cross out such Item (2).
- -------------------------------------------------------------------------------------------------------------------------
SIGNATURE____________________________________________________ DATE ________________ PART 3 -- AWAITING TIN [ ]
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
10
<PAGE> 11
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld but that such amounts
will be refunded to me if I then provide a taxpayer identification number within
sixty (60) days.
- ---------------------------------------- -------------------------------
Signature Date
<PAGE> 12
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone numbers listed below. Additional copies of
the Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below, and
will be furnished promptly at the Purchaser's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
All Others Call Toll Free (800) 223-2064
<PAGE> 1
Exhibit 11(a)(3)
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK OF DEFIANCE, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock par value $0.05 per
share (all of the shares of common stock being hereinafter collectively referred
to as the "Shares") of Defiance, Inc., are not immediately available, (ii) if
Share Certificates and all other required documents cannot be delivered to
American Stock Transfer & Trust Company as Depositary (the "Depositary"), prior
to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as
defined below)) or (iii) if the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or mail or transmitted by facsimile transmission to the
Depositary. See Section 2 of the Offer to Purchase.
The Depositary for the Offer is:
American Stock Transfer & Trust Company
<TABLE>
<S> <C>
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
40 Wall Street (718) 234-5001
46th Floor
New York, New York 10005 Confirm by Telephone:
(718) 921-8200
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to DN Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of New Hampshire Oak, Inc., upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
January 13, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure described in
Section 2 of the Offer to Purchase.
Number of Shares:
- --------------------------------------------------------------------------------
Certificate Nos. (If Available):
- --------------------------------------------------------------------------------
[ ] Check if Shares will be delivered by book-entry transfer
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account No.:
- --------------------------------------------------------------------------------
Signature(s) of Holder(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
Name(s) of Holders:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please Type or Print
Address:
- --------------------------------------------------------------------------------
Zip Code
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or which is a commercial bank or trust company having an office or correspondent
in the United States that is a member in good standing of the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program, guarantees
to deliver to the Depositary, at its address set forth above, Share Certificates
evidencing the Shares tendered hereby, in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's account
at The Depository Trust Company, in each case with delivery of (a) a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed, with
any required signature guarantees or (b) an Agent's Message (as defined in the
Offer to Purchase) in the case of a book-entry delivery, and any other required
documents, all within three Nasdaq Stock Market trading days of the date hereof.
Please Type or Print
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Name: Title:
- --------------------------------------------- ---------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
Exhibit 11(a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF DEFIANCE, INC. AT $9.50 NET PER SHARE
BY DN ACQUISITION CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
January 13, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by DN Acquisition Corporation, a Delaware
corporation (the "Purchaser") and an indirect wholly-owned subsidiary of The
General Chemical Group Inc., a Delaware corporation, to act as Information Agent
in connection with Purchaser's offer to purchase all outstanding shares of
common stock, par value $0.05 per share (all of the shares of common stock being
hereinafter collectively referred to as the "Shares"), of Defiance, Inc., a
Delaware corporation (the "Company"), at a price of $9.50 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in Purchaser's Offer to Purchase, dated January 13, 1999
(the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
NUMBER OF SHARES WHICH SHALL CONSTITUTE IN EXCESS OF FIFTY PERCENT (50%) OF THE
OUTSTANDING SHARES ON A FULLY-DILUTED BASIS (SUCH BASIS ASSUMES THAT ALL SHARES
UNDERLYING VESTED AND UNVESTED STOCK OPTIONS ARE ISSUED AND OUTSTANDING), AND
(II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE ANTITRUST WAITING PERIODS.
Enclosed for your information and use are copies of the following
documents:
1. Offer to Purchase, dated January 13, 1999;
2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
certificates evidencing Shares and all other required documents are not
immediately available or cannot be delivered to American Stock Transfer &
Trust Company (the "Depositary") by the Expiration Date (as defined in the
Offer to Purchase) or if the procedure for book-entry transfer cannot be
completed by the Expiration Date;
4. A letter to stockholders of the Company from Thomas H. Roulston II,
a member of the Board of Directors of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer; and
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
<PAGE> 2
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (the "Share Certificates") or, timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase), (ii) a
Letter of Transmittal (or facsimile thereof) properly completed and duly
executed or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry transfer and (iii) any other required documents in
accordance with the instructions contained in the Letter of Transmittal.
If a holder of Shares wishes to tender Shares, but such Stockholders's
Share Certificates are not immediately available or such Stockholder cannot
deliver the Share Certificates and all other required documents, or cannot
complete the procedure for book-entry transfer, prior to the expiration of the
Offer, a tender of Shares may be effected by following the guaranteed delivery
procedure described in Section 2 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Depositary and the Information Agent as described
in the Offer) in connection with the solicitation of tenders of Shares pursuant
to the Offer. However, Purchaser will reimburse you for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
your clients. Purchaser will pay or cause to be paid any stock transfer taxes
payable with respect to the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer, or requests for
additional copies of the enclosed materials, should be addressed to us at the
address and telephone number set forth on the back cover page of the Offer to
Purchase.
Very truly yours,
Georgeson & Company Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU
OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PURCHASER, THE
COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
Exhibit 11(a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DEFIANCE, INC.
FOR $9.50 NET PER SHARE
BY
DN ACQUISITION CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated January 13,
1999 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") in connection with
the offer to purchase by DN Acquisition Corporation, a Delaware corporation (the
"Purchaser"), and an indirect wholly-owned subsidiary of The General Chemical
Group Inc., a Delaware corporation, all outstanding shares of common stock, par
value $0.05 per share (all of the shares of common stock being hereinafter
collectively referred to as the "Shares"), of Defiance, Inc., a Delaware
corporation (the "Company"), at a price of $9.50 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $9.50 per Share, net to the seller in cash
without interest thereon.
2. The Offer is being made for all of the outstanding Shares.
3. The Board of Directors of the Company has unanimously determined
that the Offer is advisable and is fair to and in the best interests of the
Company and its stockholders, and recommends that stockholders accept the
Offer and tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Thursday, February 11, 1999, unless the Offer is
extended.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least the number of Shares which shall constitute in excess of fifty
percent (50%) of the Shares outstanding on a fully diluted basis (such
basis assumes that all Shares underlying vested and unvested stock options
are issued and outstanding) and (ii) the expiration or termination of any
applicable antitrust waiting periods.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes with respect to the purchase of
Shares by Purchaser pursuant to the Offer.
<PAGE> 2
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made only by the Offer to Purchase and the related Letter of
Transmittal and is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the Offer or the
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. However, Purchaser may, in its discretion, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction. In those
jurisdictions where the securities laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DEFIANCE, INC.
BY
DN ACQUISITION CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated January 13, 1999, and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer"), in
connection with the offer to purchase by DN Acquisition Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of The General Chemical
Group Inc., a Delaware corporation, all outstanding shares of common stock, par
value $0.05 per share (all of the shares of common stock being hereinafter
collectively referred to as the "Shares"), of Defiance, Inc., a Delaware
corporation, at a price of $9.50 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer. This will instruct you to tender the number of Shares indicated below
(or, if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Number of Shares to Be Tendered*:
- ----------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PRINT NAME(S))
- --------------------------------------------------------------------------------
(PRINT ADDRESSE(S))
- --------------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER(S))
- --------------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
GIVE THE
TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT NUMBER OF --
- -------------------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult, or if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person
minor, or incompetent person (3)
7. a. The usual revocable savings trust The
account (grantor is also trustee) grantor-trustee(1)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
GIVE THE
TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT NUMBER OF --
- -------------------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate or pension The legal entity (Do
trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- ---------------------------------------------------------------
---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give correct taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
Exhibit 11(a)(7)
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED
JANUARY 13, 1999 AND THE RELATED LETTER OF TRANSMITTAL AND IS NOT BEING MADE TO,
NOR WILL TENDERS BE ACCEPTED FROM, OR ON BEHALF OF, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE SECURITIES, BLUE SKY OR OTHER LAWS OF SUCH JURISDICTION.
HOWEVER, PURCHASER MAY, IN ITS DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM
NECESSARY TO MAKE THE OFFER IN ANY JURISDICTION AND EXTEND THE OFFER TO HOLDERS
OF SHARES IN ANY SUCH JURISDICTION. IN THOSE JURISDICTIONS WHERE SECURITIES LAWS
REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE
DEEMED TO BE MADE ON BEHALF OF PURCHASER BY ONE OR MORE REGISTERED BROKERS OR
DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DEFIANCE, INC.
AT
$9.50 NET PER SHARE
BY
DN ACQUISITION CORPORATION
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
THE GENERAL CHEMICAL GROUP INC.
DN Acquisition Corporation, a Delaware corporation ("Purchaser") and an
indirect wholly-owned subsidiary of The General Chemical Group Inc., a Delaware
corporation ("General Chemical Group"), is offering to purchase for cash all the
outstanding shares of common stock, par value $0.05 per share (all of the shares
of common stock being hereinafter collectively referred to as the "Shares"), of
Defiance, Inc., a Delaware corporation (the "Company"), at a purchase price of
$9.50 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
January 13, 1999 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). Holders of Shares whose certificates for such Shares ("Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary (as defined
below) prior to the Expiration Date (as defined below), or who cannot complete
the procedure for book-entry transfer on a timely basis, may nevertheless tender
their Shares by following the procedure for guaranteed delivery set forth in
Section 2 of the Offer to Purchase. The holders of the Shares are sometimes
referred to herein as "stockholders".
The purpose of the Offer is for Purchaser to acquire control of the Company
and to purchase as many Shares as are tendered in the Offer.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
NUMBER OF SHARES THAT CONSTITUTE IN EXCESS OF FIFTY PERCENT (50%) OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (SUCH BASIS ASSUMES ALL SHARES UNDERLYING
VESTED AND UNVESTED STOCK OPTIONS ARE ISSUED AND OUTSTANDING), AND (II) THE
EXPIRATION OR TERMINATION OF ANY APPLICABLE ANTITRUST WAITING PERIODS. THE OFFER
IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to American Stock Transfer &
Trust Company (the "Depositary") of Purchaser's acceptance for payment of such
Shares pursuant to the Offer. Upon the terms and subject to the conditions of
the Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payments
from Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. In all cases, payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) the Share Certificates evidencing such Shares
or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 2 of the Offer to
Purchase, (ii) a properly completed and
<PAGE> 2
duly executed Letter of Transmittal (or a facsimile thereof) with any required
signature guarantees, or an Agent's Message (as defined in Section 2 of the
Offer to Purchase) in connection with a book-entry transfer and (iii) any other
documents required by the Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Agreement and Plan of Merger among New
Hampshire Oak, Inc., a Delaware corporation ("Parent") and a direct wholly-owned
subsidiary of General Chemical Group, the Purchaser and the Company, dated as of
January 7, 1999), to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary. Any such
extension will be followed as promptly as practicable by public announcement
thereof to be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable except that such Shares may be withdrawn by the tendering
stockholder at any time prior to the Expiration Date and, unless theretofore
accepted for payment and paid for by Purchaser pursuant to the Offer, may also
be withdrawn by such Stockholder at any time after March 14, 1999. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Thursday,
February 11, 1999 unless and until Purchaser shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall refer to the latest time and date at which the Offer, as so extended by
Purchaser, shall expire. For a withdrawal to be effective, a written,
telegraphic or facsimile transmission notice of withdrawal must be timely
received by the Depositary at its address set forth on the back cover of the
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person having tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of such Shares, if different
from that of the person who tendered such Shares. If Share Certificates
evidencing Shares to be withdrawn have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution (as defined in Section 2 of the Offer to Purchase),
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 2 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
The Board of Directors of the Company has unanimously determined that the
Offer is advisable and is fair to and in the best interests of the Company and
the stockholders, and recommends that the stockholders accept the Offer and
tender their Shares pursuant to the Offer.
The information required to be disclosed by Rule 14d-6 (e) (1) (vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
Purchaser is requesting stockholder lists and security position listings
from the Company, and the Offer to Purchase and the related Letter of
Transmittal and other tender offer materials will be mailed to record
stockholders and will be furnished to brokers, banks, and similar persons whose
names, or the names of whose nominees, appear on the Company's list of
stockholders or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase and the related Letter of
Transmittal and all other tender offer materials may be directed to the
Information Agent as set forth below, and copies will be furnished promptly at
Purchaser's expense. No fees or commissions will be payable to brokers, dealers
or other persons, other than the Information Agent and the Depositary for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
Georgeson & Company, Inc.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect
(212) 440-9800
All Others Call Toll Free
(800) 223-2064
January 13, 1999
<PAGE> 1
Exhibit 11(a)(8)
Contacts: Norman Ritter
The General Chemical Group
603/929-2322
www.genchem.com
Stanley Ulchaker
Edward Howard & Co.
216/781-2400
www.defiance-inc.com
FOR IMMEDIATE RELEASE
GENERAL CHEMICAL TO ACQUIRE PRECISION-BEARINGS MAKER DEFIANCE IN A CASH TENDER
- ------------------------------------------------------------------------------
OFFER
- -----
HAMPTON, N.H. and CLEVELAND, OHIO--(BUSINESS WIRE)--January 8, 1998--The General
Chemical Group Inc. (NYSE: GCG) and Defiance, Inc. (NASDAQ: DEFI) today agreed
that General Chemical will acquire, in a cash tender offer, all of the 6 million
shares of Defiance common stock outstanding, a transaction valued at
approximately $57 million, or $9.50 per share.
"The purchase of Defiance, a leading manufacturer of precision bearings for
motor-vehicle engines, reflects our strategy of pursuing value-enhancing
acquisitions that contribute to earnings and cash-flow growth," Richard R.
Russell, president and chief executive officer of General Chemical, said. "The
transaction is expected to be immediately accretive to General Chemical's
earnings.
"Our Toledo Technologies subsidiary is the world's leading designer and producer
of stamped and machined valve-train components used in today's high-growth
overhead-cam engines," Mr. Russell continued. "The combination of these products
and Defiance's precision bearings will create a larger, more integrated supplier
of engine systems and assemblies. Building on this strength, we will continue to
expand our portfolio of precision engine components and systems to serve our
global customers. We are also enthusiastic about opportunities that Defiance's
tooling and testing services offer in broadening our base in the automotive
industry."
"Our partnership with General Chemical Group will be good for all of Defiance's
customers and employees," said Jerry A. Cooper, Defiance's president and chief
executive officer. "We have realized increased value for our shareholders. At
the same time, this combination will be good for all of Defiance's operations,
and should position Defiance to move forward with plans to enhance our
business."
General Chemical also produces fluid-handling equipment for the transportation
industry and inorganic chemicals for a wide variety of customers and markets.
Defiance also provides testing and tooling-development services to the
automotive industry, in addition to manufacturing anti-friction bearings and
metal prototype dies and parts.
<PAGE> 2
The Board of Directors of Cleveland-based Defiance unanimously approved the
transaction and received from McDonald Investments, Inc. a written opinion that,
as of the date of such opinion and based upon and subject to certain matters
stated therein, the $9.50-per-share cash consideration was fair, from a
financial point of view, to Defiance stockholders.
The tender offer is subject to, among other things, the tender of at least 50%
of all of the shares outstanding on a fully diluted basis, and the termination
or expiration of the waiting period under the Hart-Scott-Rodino Act. In the
event of the termination of the merger agreement under certain circumstances
General Chemical would be entitled to a termination fee of $1.75 million and the
reimbursement of certain expenses.
Note: Due to the tender offer announcement by General Chemical Group, Defiance
has adopted a self-imposed quiet period and will provide no further comment on
these matters beyond what is contained in this press release.
Note: This press release contains forward-looking statements within the meaning
of the Private Litigation Reform Act of 1995. Actual results may differ
materially from anticipated results due to certain risks and uncertainties,
including but not limited to general economic conditions in the markets in which
Defiance operates, fluctuations in the production of vehicles for which Defiance
is a supplier, fluctuations in the level of new model development activity at
Defiance's significant customers, labor disputes involving Defiance or its
significant customers, and other risks detailed from time to time in Defiances's
Securities and Exchange Commission filings.
<PAGE> 1
Exhibit 11(b)(1)
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
among
THE GENERAL CHEMICAL GROUP INC.,
The Several Lenders
from Time to Time Parties Hereto,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Documentation Agent
THE BANK OF NOVA SCOTIA,
as Syndication Agent
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of June 15, 1998
CHASE SECURITIES INC., as Arranger
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
Pages
-----
SECTION 1. DEFINITIONS ................................................... 1
1.1 Defined Terms ................................................... 1
1.2 Other Definitional Provisions ................................... 24
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS ............................... 24
2.1 Revolving Credit Commitments .................................... 24
2.2 Procedure for Revolving Credit Borrowing ........................ 25
2.3 Term Loan Commitments ........................................... 25
2.4 Procedure for Term Loan Borrowing ............................... 26
2.5 Repayment of Term Loans ......................................... 26
2.6 Repayment of Loans; Evidence of Debt ............................ 27
2.7 Commitment Fee .................................................. 28
2.8 Optional Termination or Reduction of Revolving Credit
Commitments ................................................ 28
2.9 Optional Prepayments; Mandatory Prepayments and Commitment
Reductions ................................................. 29
2.10 Conversion and Continuation Options ............................ 32
2.11 Minimum Amounts of Tranches .................................... 33
2.12 Interest Rates and Payment Dates ............................... 33
2.13 Computation of Interest and Fees ............................... 33
2.14 Inability to Determine Interest Rate ........................... 34
2.15 Pro Rata Treatment and Payments ................................ 34
2.16 Illegality ..................................................... 35
2.17 Requirements of Law ............................................ 35
2.18 Taxes .......................................................... 37
2.19 Indemnity ...................................................... 39
2.20 Change of Lending Office ....................................... 39
2.21 Replacement of Lenders under Certain Circumstances ............. 39
SECTION 3. LETTERS OF CREDIT ............................................. 40
3.1. L/C Commitment ................................................. 40
3.2. Procedure for Issuance of Letters of Credit .................... 40
3.3. Fees, Commissions and Other Charges ............................ 41
3.4. L/C Participations ............................................. 41
3.5. Reimbursement Obligation of the Borrower ....................... 42
3.6. Obligations Absolute ........................................... 43
3.7. Letter of Credit Payments ...................................... 43
3.8. Application .................................................... 43
SECTION 4. REPRESENTATIONS AND WARRANTIES ................................ 43
4.1 Financial Condition ............................................. 44
4.2 No Change ....................................................... 44
4.3 Corporate Existence; Compliance with Law ........................ 44
4.4 Corporate Power; Authorization; Enforceable Obligations ......... 45
<PAGE> 3
4.5 No Legal Bar .................................................... 45
4.6 No Material Litigation .......................................... 45
4.7 No Default ...................................................... 46
4.8 Ownership of Property; Liens .................................... 46
4.9 Intellectual Property ........................................... 46
4.10 Taxes .......................................................... 46
4.11 Federal Regulations ............................................ 46
4.12 ERISA .......................................................... 47
4.13 Investment Company Act; Other Regulations ...................... 47
4.14 Subsidiaries ................................................... 47
4.15 Purpose of Loans ............................................... 47
4.16 Environmental Matters .......................................... 47
4.17 Soda Ash Partners .............................................. 49
4.18 Solvency ....................................................... 49
4.19 Labor Matters .................................................. 49
4.20 Accuracy of Information, etc ................................... 49
4.21 Security Documents ............................................. 50
4.22 Year 2000 ...................................................... 50
SECTION 5. CONDITIONS PRECEDENT .......................................... 50
5.1 Conditions to Initial Extensions of Credit ...................... 50
5.2 Conditions to Each Extension of Credit .......................... 52
SECTION 6. AFFIRMATIVE COVENANTS ......................................... 53
6.1 Financial Statements ............................................ 53
6.2 Certificates; Other Information ................................. 54
6.3 Payment of Obligations .......................................... 55
6.4 Conduct of Business and Maintenance of Existence ................ 55
6.5 Maintenance of Property; Insurance .............................. 55
6.6 Inspection of Property; Books and Records; Discussions .......... 55
6.7 Notices ......................................................... 56
6.8 Environmental Laws .............................................. 56
6.9 Further Assurances .............................................. 57
6.10 Additional Collateral .......................................... 57
6.11 Existing Subordinated Notes .................................... 58
SECTION 7. NEGATIVE COVENANTS APPLICABLE TO ALL COMMITMENTS AND
LOANS OTHER THAN TRANCHE B TERM LOAN COMMITMENTS AND
TRANCHE B LOANS .............................................. 58
7.1 Financial Condition Covenants ................................... 59
7.2 Limitation on Indebtedness ...................................... 59
7.3 Limitation on Liens ............................................. 61
7.4 Limitation on Guarantee Obligations ............................. 62
7.5 Limitation on Fundamental Changes ............................... 62
7.6 Limitation on Sale of Assets .................................... 63
7.7 Reserved ........................................................ 63
7.8 Limitation on Restricted Payments ............................... 63
- ii -
<PAGE> 4
Page
----
7.9 Limitation on Capital Expenditures ............................ 65
7.10 Limitation on Investments, Loans and Advances ................ 65
7.11 Limitations on Optional Payments and Modifications of
Agreements ............................................... 67
7.12 Limitation on Transactions with Affiliates ................... 67
7.13 Limitation on Sales and Leasebacks ........................... 67
7.14 Limitation on Changes in Fiscal Year ......................... 68
7.15 Limitation on Negative Pledge Clauses ........................ 68
7.16 Limitation on Lines of Business .............................. 68
7.17 Limitation on Optional Payments and Modifications
of Tranche B Term Loans ................................... 68
SECTION 8. COVENANTS APPLICABLE TO TRANCHE B TERM LOAN COMMITMENTS
AND TRANCHE B TERM LOANS ................................... 68
SECTION 9. EVENTS OF DEFAULT ........................................... 69
9.1 Certain Bankruptcy Events ..................................... 69
9.2 Other Events of Default Applicable to the Tranche A
Commitments, Revolving Credit Commitments and
Amounts Owing Thereunder ................................. 70
9.3 Certain Events of Default Applicable to Tranche B
Term Loan Commitments and Amounts Owing Thereunder ....... 72
9.4 Certain Provisions Applicable to Letters of Credit ............ 74
9.5 Certain Waivers ............................................... 75
SECTION 10. THE ADMINISTRATIVE AGENT ................................... 75
10.1 Appointment .................................................. 75
10.2 Delegation of Duties ......................................... 75
10.3 Exculpatory Provisions ....................................... 75
10.4 Reliance by Administrative Agent ............................. 76
10.5 Notice of Default ............................................ 76
10.6 Non-Reliance on Administrative Agent and Other Lenders ....... 77
10.7 Indemnification .............................................. 77
10.8 Administrative Agent in Its Individual Capacity .............. 78
10.9 Successor Administrative Agent ............................... 78
10.10 Documentation Agent and Syndication Agent ................... 78
SECTION 11. MISCELLANEOUS .............................................. 78
11.1 Amendments and Waivers ....................................... 78
11.2 Notices ...................................................... 81
11.3 No Waiver; Cumulative Remedies ............................... 82
11.4 Survival of Representations and Warranties ................... 82
11.5 Payment of Expenses and Taxes ................................ 82
11.6 Successors and Assigns; Participations and Assignments ....... 83
11.7 Adjustments; Set-off ......................................... 86
11.9 Severability ................................................. 87
11.10 Integration ................................................. 87
- iii -
<PAGE> 5
Page
----
11.11 GOVERNING LAW ............................................... 87
11.12 Submission To Jurisdiction; Waivers ......................... 87
11.13 Acknowledgements ............................................ 88
11.14 WAIVERS OF JURY TRIAL ....................................... 88
11.15 Confidentiality ............................................. 88
ANNEX A PRICING GRID
ANNEX B COVENANTS APPLICABLE TO TRANCHE B TERM LOAN FACILITY
SCHEDULES
Schedule I Lenders, Commitments and Addresses
Schedule II Subsidiaries of the Borrower
Schedule III Outstanding Indebtedness; Existing Liens
EXHIBITS
Exhibit A-1 Form of Opinion of Goodwin, Procter & Hoar LLP
Exhibit A-2 Form of Opinion of General Counsel of GenChem
Exhibit B Form of Compliance Certificate
Exhibit C Form of Assignment and Acceptance
Exhibit D Form of Confidentiality Agreement
Exhibit E Form of Guarantee and Pledge Agreement
Exhibit F-1 Form of Revolving Credit Note
Exhibit F-2 Form of Term Note
Exhibit G Form of Prepayment Option Notice
Exhibit H Form of Exemption Certificate
- iv -
<PAGE> 6
CREDIT AGREEMENT, dated as of June 15, 1998, among THE GENERAL CHEMICAL
GROUP INC., a Delaware corporation (the "BORROWER"), the several banks and other
financial institutions from time to time parties to this Agreement (the
"LENDERS"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
documentation agent for the Lenders (the "DOCUMENTATION AGENT"), THE BANK OF
NOVA SCOTIA, as syndication agent for the Lenders (THE "SYNDICATION AGENT") and
THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative
agent for the Lenders under the Revolving Credit Facility, the Tranche A Term
Loan Facility and the Tranche B Term Loan Facility (in such capacity, the
"ADMINISTRATIVE AGENT").
RECITALS
--------
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower a $300,000,000 six-year revolving credit facility (as hereinafter
defined, the "REVOLVING CREDIT FACILITY"), a $100,000,000 six-year term loan
facility (as hereinafter defined, the "TRANCHE A TERM LOAN FACILITY") and a
$200,000,000 eight-year term loan facility (as hereinafter defined, the "TRANCHE
B TERM LOAN FACILITY"), the proceeds of which will be used by the Borrower to
finance working capital and general corporate purposes, including financing
permitted acquisitions and permitted investments and funding the Refinancing (as
hereinafter defined); and
WHEREAS, the Lenders are willing to make available the Revolving Credit
Facility, the Tranche A Term Loan Facility and Tranche B Term Loan Facility
pursuant to this Agreement upon the terms and conditions hereinafter set forth;
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"PRIME RATE" shall mean the rate of interest per annum publicly announced from
time to time by Chase as its prime rate in effect at its principal office in New
York City (the Prime Rate not being intended to be the lowest rate of interest
charged by Chase in connection with extensions of credit to debtors); "BASE CD
RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the
<PAGE> 7
2
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City time,
on such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it; and
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it. If for
any reason the Administrative Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to ascertain the
Base CD Rate or the Federal Funds Effective Rate, or both, for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the ABR shall be
determined without regard to clause (b) or (c), or both, of the first sentence
of this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the ABR due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
shall be effective as of the opening of business on the effective day of such
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"ABR LOANS": Loans the rate of interest applicable to which is based
upon the ABR.
"ADJUSTMENT DATE": as defined in the Pricing Grid.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, whether or not exercised, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise or through the direct or indirect
ownership of 10% or more of any class of Capital Stock of such Person.
"AGGREGATE EXPOSURE": with respect to any Lender at any time, an amount
equal to (a) until the Closing Date, the aggregate amount of such Lender's
Commitments at such time and (b) thereafter, the sum of (i) the aggregate then
unpaid principal amount of such Lender's Term Loans and (ii) the amount of such
Lender's Revolving Credit Commitment then in effect or, if the Revolving Credit
Commitments
<PAGE> 8
3
have been terminated, the amount of such Lender's Revolving Extensions of Credit
then outstanding.
"AGGREGATE EXPOSURE PERCENTAGE": with respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.
"AGI": The Andover Group, Inc., a Delaware corporation.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE MARGIN": for each Type of Loan, the rate per annum set
forth under the relevant column heading below:
<TABLE>
<CAPTION>
Base Rate Eurodollar
Loans Loans
----- -----
<S> <C> <C>
Revolving Credit Loans 0 % 0.75%
Tranche A Term Loans 0 % 0.75%
Tranche B Term Loans 0.50% 1.75%
</TABLE>
PROVIDED, that on and after the first Adjustment Date after December 31, 1998,
the Applicable Margin will be determined pursuant to the Pricing Grid.
"APPLICATION": an application, in such form as the relevant Issuing
Bank may specify from time to time, requesting such Issuing Bank to open a
Letter of Credit.
"APPROVED FUND": with respect to any Lender that is a fund that invests
in bank loans, any other fund that invests in bank loans which is managed or
advised by the same investment advisor as such Lender or by an affiliate of such
investment advisor.
"ASSET SALE": (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices and other than obsolete assets, and (ii) the
issue or sale by the Borrower or any of its Subsidiaries of Equity Interests of
any of the Borrower's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $2,000,000 or (b) for net proceeds in
excess of $2,000,000. Notwithstanding the foregoing, the following items shall
not be deemed to be Asset Sales: (i) a transfer of assets by the Borrower to a
Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Borrower or to
another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Borrower or to another Wholly Owned Subsidiary,
(iii) a Restricted Payment that is permitted by subsection 7.8, (iv) exchanges,
swaps and
<PAGE> 9
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similar transactions involving like-kind or similar assets in an aggregate
principal amount not to exceed $20,000,000 in any twelve-month period, and (v) a
lien that is permitted under subsection 7.3.
"ASSIGNEE": as defined in subsection 11.6(c).
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment then in effect over (b) such Lender's Revolving
Extensions of Credit then outstanding.
"BASIC LENDER": a Revolving Credit Lender or a Tranche A Term Loan
Lender; collectively, the "BASIC LENDERS".
"BOARD": the Board of Governors of the Federal Reserve System and any
successor thereto.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2, 2.4 or 3.2 as a date on which the Borrower requests the Lenders
to make Loans hereunder or an Issuing Bank to issue a Letter of Credit
hereunder.
"BUSINESS": as defined in subsection 4.16.
"BUSINESS DAY": (i) for all purposes other than as covered by clause
(ii) below, a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close and (ii) with
respect to notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in Dollar deposits in the interbank eurodollar market.
"CAPITAL EXPENDITURES": as defined in subsection 7.9.
"CAPITAL STOCK": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"CASH": money, currency or a credit balance in a deposit account, in
each case which is free of Liens (except Liens in favor of the Administrative
Agent and Liens consisting of bankers' set-off rights).
"CASH EQUIVALENTS: (i) any evidence of Indebtedness with a maturity of
two years or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of
<PAGE> 10
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deposit or acceptances with a maturity of one year or less of any Lender or any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) master notes, loan participations and commercial paper with
a maturity of two years or less issued by any Lender or any corporation (except
an Affiliate or Subsidiary of the Borrower) organized under the laws of any
State of the United States or the District of Columbia and rated at least A-1 by
S&P or at least P-1 by Moody's; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within one year from the date of acquisition;
PROVIDED that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October 31,
1985; (v) time deposits of foreign banks having a combined capital and surplus
of not less than $500,000,000; (vi) repurchase agreements with nationally
recognized securities dealers having total capital funds in excess of
$100,000,000; PROVIDED that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (vii) institutional money market funds
investing principally in obligations permitted in clauses (i)-(vi) above.
"CASH FLOW COVERAGE RATIO": as at the last day of any fiscal quarter of
the Borrower, the ratio of (a) Consolidated Cash Flow for the period of four
fiscal quarters ending on such day to (b) Consolidated Interest Expense for the
period of four fiscal quarters ending on such day.
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member of the
Bank Insurance Fund classified as well-capitalized and within supervisory
subgroup "B" (or a comparable successor assessment risk classification) within
the meaning of 12 C.F.R. 327.3(d) (or any successor provision) to the Federal
Deposit Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States.
"C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board) in respect of
new non-personal time deposits in Dollars of $100,000 or more having a maturity
of 30 days or more.
"CHANGE IN CONTROL": (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders
in the aggregate or an ESOP, is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of
the total voting power of the Voting Stock of the Borrower at any time that the
Permitted Holders in
<PAGE> 11
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the aggregate "beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock of
the Borrower than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Borrower (for the purposes of this
clause (i), such other person shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation, if such other
person beneficially owns (as so defined), directly or indirectly, more than 35%
of the total voting power of the Voting Stock of such parent corporation and the
Permitted Holders in the aggregate beneficially own (as so defined), directly or
indirectly, in the aggregate a lesser percentage of the total voting power of
the Voting Stock of such parent corporation and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent corporation); (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by either (A) a vote
of 66-2/3% of the directors of the Borrower then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved or (B) in the event of the death of all the
members of the Board of Directors of the Borrower, a vote of Permitted Holders
who beneficially own, directly or indirectly, a majority in the aggregate of the
total voting power of the Voting Stock of the Borrower) cease for any reason to
constitute a majority of the Board of Directors of the Borrower then in office;
or (iii) for purposes of clause (j) of subsection 9.2, the occurrence of a
"change of control" (however denominated) under and as defined in any credit
agreement, indenture or similar agreement to which the Borrower or any of its
Subsidiaries is a party providing for commitments of credit in excess of
$10,000,000.
"CHASE": The Chase Manhattan Bank.
"CLOSING DATE": the date on which the conditions precedent set forth in
subsection 5.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all assets of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
"COMMITMENT": as to any Lender, the sum of the Tranche A Term Loan
Commitment, the Tranche B Term Loan Commitment and the Revolving Credit
Commitment of such Lender.
"COMMITMENT FEE RATE": 1/4 of 1% per annum; PROVIDED, that on and after
the first Adjustment Date after December 31, 1998, the Commitment Fee Rate will
be determined pursuant to the Pricing Grid.
<PAGE> 12
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"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414(b) or (c) of the Code.
"COMPLIANCE CERTIFICATE": a certificate substantially in the form of
Exhibit B.
"CONFIDENTIAL INFORMATION MEMORANDUM": the Confidential Information
Memorandum dated April 1998 prepared in connection with the Facilities.
"CONSOLIDATED ADJUSTED NET INCOME": for any period, Consolidated Net
Income for such period adjusted by excluding (i) any net extraordinary gains or
losses, (ii) any net gains or losses in respect of sales of Capital Stock or
dispositions of assets out of the ordinary course of business, (iii) any net
income of any Person accrued during any period during which such Person was not
a Subsidiary of the Borrower, except to the extent of dividends or other
distributions actually paid to the Borrower or any Subsidiary out of such net
income and except to the extent utilized in determining pro forma compliance for
Permitted Acquisitions, (iv) the amortization of deferred financing costs and
(v) non-cash gains or losses resulting from fluctuations in currency exchange
rates.
"CONSOLIDATED CASH FLOW": for any period, the aggregate of (i)
Consolidated Net Income for such period PLUS (ii) Consolidated Interest Expense
deducted in computing such Consolidated Net Income PLUS (iii) Consolidated Tax
Expense deducted in computing such Consolidated Net Income PLUS
(iv) Consolidated Non-Cash Charges deducted in computing such Consolidated Net
Income MINUS (v) the net gain incurred in the retirement of Indebtedness plus
(vi) the net loss incurred in the retirement of Indebtedness MINUS
(vii) Consolidated Non-Cash Gains included in computing such Consolidated Net
Income MINUS (viii) cash gains from sales of assets (other than inventory) to
the extent included in computing such Consolidated Net Income PLUS (ix) cash
losses from sales of assets (other than inventory) to the extent deducted in
computing such Consolidated Net Income MINUS (x) solely for purposes of
subsection 7.8(a) the aggregate amount of principal payments of the Loans
scheduled to come due during such period.
"CONSOLIDATED INTEREST EXPENSE: for any period, the aggregate of the
interest expense of the Borrower and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP, including
amortization of original issue discount and the interest portion of any deferred
payment obligations, excluding, in the case of the Borrower, any interest
expense reflected on the Borrower's financial statements which is attributable
to Indebtedness of the Borrower and is so reflected solely as a result of
"push-down" accounting treatment.
"CONSOLIDATED NET INCOME": for any period, net income of the Borrower
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
<PAGE> 13
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"CONSOLIDATED NET WORTH": as of the date of determination, all items
which in accordance with GAAP would be included under shareholders' equity on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date.
"CONSOLIDATED NON-CASH CHARGES": for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Borrower and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED NON-CASH GAINS": for any period, the aggregate non-cash
revenue items of the Borrower and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TAX EXPENSE": for any period, the aggregate of the U.S.
federal, state and local income tax expense and foreign tax expense of the
Borrower and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED TOTAL INDEBTEDNESS": as of the date of determination, all
Indebtedness and Guarantee Obligations of the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CSI": Chase Securities Inc., the arranger of the Facilities.
"CURRENCY AGREEMENT": with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement
designed to protect such Person or any of its Subsidiaries against fluctuations
in currency values.
"DEFAULT": any of the events specified in Section 9, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"DESIGNATED ISSUER": Chase Manhattan Bank Delaware, a Delaware banking
corporation, in its individual capacity.
"DOLLARS" AND "$": dollars in lawful currency of the United States of
America.
"DOMESTIC SUBSIDIARY": any Subsidiary organized under the laws of the
United States or any jurisdiction therein or thereof.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of
<PAGE> 14
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any Governmental Authority or other Requirements of Law (including common law)
regulating, relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any time
hereafter be in effect.
"EQUITY INTERESTS": Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ESOP": an employee stock ownership plan for the benefit of the
Borrower's or a Subsidiary's employees.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at
which Chase is offered Dollar deposits at or about 10:00 A.M., New York City
time, two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange options in respect of its Eurodollar Loans are then being conducted for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its Eurodollar
Loan to be outstanding during such Interest Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the same
date and end on
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the same later date (whether or not such Loans shall originally have been made
on the same day).
"EVENT OF DEFAULT": any of the events specified in Section 9, PROVIDED
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"EXCHANGE ACT": the Securities Exchange Act of 1934, as amended.
"EXISTING CREDIT AGREEMENTS": the collective reference to (i) the
Revolving Credit Agreement dated as of September 15, 1993, as amended (the
"EXISTING REVOLVING CREDIT AGREEMENT"), among GenChem, the lenders party thereto
and Chase (as successor to Chemical Bank), as administrative agent, (ii) the
Term Loan Agreement dated as of August 4, 1994, as amended, among GenChem, the
lenders party thereto and Chase (as successor to Chemical Bank), as
administrative agent, and (iii) the Credit Agreement dated as of April 30, 1997,
as amended, between the Borrower and Bank of America National Trust and Savings
Association.
"EXISTING SUBORDINATED INDENTURE": the Indenture dated as of August 15,
1993 between the Borrower and Continental Bank, National Association, as
trustee, pursuant to which the Existing Subordinated Notes were issued, as in
effect on the date hereof.
"EXISTING SUBORDINATED NOTES": the $100,000,000 in aggregate principal
amount of 9-1/4% Senior Subordinated Notes Due 2003 issued by the Borrower, as
in effect on the date hereof.
"FACILITY": each of (a) the Tranche A Term Loan Commitments and the
Tranche A Term Loans made thereunder (the "TRANCHE A TERM LOAN FACILITY"), (b)
the Tranche B Term Loan Commitments and the Tranche B Term Loans made thereunder
(the "TRANCHE B TERM LOAN FACILITY"), and (c) the Revolving Credit Commitments
and the extensions of credit made thereunder (the "REVOLVING CREDIT FACILITY").
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FOREIGN SUBSIDIARY": any Subsidiary other than a Domestic Subsidiary.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GC CANADA": General Chemical Canada Ltd., a Canadian corporation and a
Subsidiary of the Borrower.
<PAGE> 16
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"GC CANADA SENIOR NOTES": the 9.09% Senior Notes of GC Canada due May
20, 1999 in the original principal amount of $52,000,000, as the same may be
amended, modified, supplemented, replaced or refinanced from time to time.
"GC CANADA WORKING CAPITAL FACILITY": the Credit Agreement, dated as of
June 22, 1992, between GC Canada and The Toronto-Dominion Bank, as the same may
be amended, modified, supplemented, replaced or refinanced from time to time.
"GENCHEM": General Chemical Corporation, a Delaware corporation.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity (including the National Association
of Insurance Commissioners) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"GUARANTEE AND PLEDGE AGREEMENT": the Guarantee and Pledge Agreement to
be executed and delivered by the Borrower and each Subsidiary Guarantor,
substantially in the form of Exhibit E, as the same may be amended, supplemented
or otherwise modified from time to time.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS")
of any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such
<PAGE> 17
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Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"HAZARDOUS MATERIALS": any hazardous materials, hazardous wastes,
hazardous constituents or hazardous or toxic substances defined or regulated as
such in or under any Environmental Law, and including, without limitation,
petroleum products (including crude oil or any fraction thereof), asbestos in
friable form, polychlorinated biphenyls, and urea formaldehyde insulation.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) the face amount of all letters of credit issued for the
account of such Person and, without duplication, all drafts drawn thereunder,
(d) all obligations of such Person under Financing Leases, (e) all obligations
of such Person in respect of acceptances issued or created for the account of
such Person and (f) the lesser of (i) all liabilities secured by any Lien on any
property owned by such Person when such Person has not assumed or otherwise
become liable for the payment thereof and (ii) the fair market value of any such
property; PROVIDED that Indebtedness shall not be deemed to include any
indebtedness which has been "economically defeased" or "in-substance defeased"
within the meaning of and in accordance with Standard No. 76 of the Financial
Accounting Standards Board.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding, (b)
as to any Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and the last
day of such Interest Period, (d) as to any Loan (other than any Revolving Credit
Loan that is an ABR Loan), the date on which such Loan is converted into another
Type of Loan or on which any repayment or prepayment is made in respect thereof
and (e) as to any Revolving Credit Loan, the Revolving Credit Termination Date
or such earlier date as the Commitments shall terminate as provided herein.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one,
<PAGE> 18
13
two, three or six months thereafter, as selected by the Borrower in its
notice of borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Administrative Agent not less
than three Business Days prior to the last day of then current Interest
Period with respect thereto;
PROVIDED that, each of the foregoing provisions relating to Interest Periods is
subject to the following:
(1) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that would otherwise extend beyond the
Revolving Credit Termination Date or beyond the date final payment is
due on the Tranche A Term Loans or the Tranche B Term Loans, as the
case may be, shall end on the Revolving Credit Termination Date or such
due date, as applicable;
(3) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"INTEREST RATE PROTECTION OBLIGATIONS": the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"INVESTMENT": as defined in subsection 7.10.
"ISSUING BANK": Chase or any Affiliate thereof, including the
Designated Issuer, or any successor thereto, each in its capacity as issuer of
any Letter of Credit.
<PAGE> 19
14
"L/C COMMITMENT": $50,000,000, as such amount may be reduced from time
to time in accordance with this Agreement.
"L/C FEE PAYMENT DATE": the last day of each March, June, September and
December.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5(a).
"LETTERS OF CREDIT": as defined in subsection 3.1(a).
"LEVERAGE RATIO": as at the last day of any fiscal quarter of the
Borrower, the ratio of (a) Consolidated Total Indebtedness as at such day to (b)
Consolidated Cash Flow for the period of four fiscal quarters ending on such
day.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"LOAN DOCUMENTS": the collective reference to this Agreement, the
Notes, the Applications and the Security Documents.
"LOAN PARTIES": the Borrower and each of its Subsidiaries party to a
Loan Document.
"LOANS": any loan made by any Lender pursuant to this Agreement.
"MAJORITY FACILITY LENDERS": with respect to any Facility, the holders
of more than 50% of the aggregate unpaid principal amount of the Term Loans or
the Total Revolving Extensions of Credit, as the case may be, outstanding under
such Facility (or, in the case of the Revolving Credit Facility, prior to any
termination of the Revolving Credit Commitments, the holders of more than 50% of
the Total Revolving Credit Commitments).
"MAJORITY REVOLVING CREDIT FACILITY LENDERS": the Majority Facility
Lenders in respect of the Revolving Credit Facility.
"MANAGEMENT AGREEMENT": the Management Agreement dated as of January 1,
1995 between the Borrower and Latona Associates Inc., as such agreement may be
amended, supplemented or otherwise modified or replaced from time to time in
accordance with subsection 7.11.
<PAGE> 20
15
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole, other than events,
developments or circumstances disclosed in the 1997 10-K or the Confidential
Information Memorandum, or (b) the validity or enforceability of this Agreement,
any of the Notes, any Application or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder. The Lenders acknowledge that the 1997 10-K and the Confidential
Information Memorandum make certain disclosures (the "DISCLOSED MATTERS")
relating to the Borrower and its Subsidiaries and that the Disclosed Matters, in
and of themselves, as reported in the 1997 10-K and the Confidential Information
Memorandum, do not constitute a Material Adverse Effect. The Lenders reserve
their rights, however, with respect to any material adverse development or event
that occurs (or as to which the Lenders obtain knowledge) with respect to the
Disclosed Matters after the Closing Date.
"MATERIAL FOREIGN SUBSIDIARY": any Material Subsidiary organized under
the laws of any jurisdiction (other than the United States or any jurisdiction
therein).
"MATERIAL SUBSIDIARY": at any date of determination, any Subsidiary of
the Borrower (i) the gross revenues of which aggregated at least 5% of the
aggregate gross revenues of the Borrower and its Subsidiaries for the most
recent period of twelve consecutive months ending prior to such date or (ii) the
book value of the assets of which aggregated at least 10% of the aggregate book
value of the assets of the Borrower and its Subsidiaries as at the last day of
the most recently ended fiscal month of the Borrower.
"MOODY'S": Moody's Investors Services, Inc.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NET CASH PROCEEDS": (a) when used in respect of any Asset Sale or
Recovery Event by or with respect to the Borrower or any of its Subsidiaries,
the gross proceeds received by such Person in Cash and Cash Equivalents
(including payment in respect of deferred payment obligations but only when
received in the form of Cash and Cash Equivalents), from such Asset Sale or
Recovery Event less (i) all legal, accounting, title, recording and transfer tax
expenses, commissions and other customary fees and expenses incurred, and all
other federal, state and local taxes assessed, in connection therewith, (ii) the
principal amount of, premium, if any, and interest on, any Indebtedness (other
than the Loans and L/C Obligations) which is secured by the assets which are the
subject of such Asset Sale or Recovery Event and which is required to be repaid
in connection with such Asset Sale or Recovery Event and (iii) amounts to be
provided by such Person as a reserve, in accordance with GAAP, against any
liabilities associated with any such Asset Sale or Recovery Event and retained
by such Person after such Asset Sale or Recovery Event, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related
<PAGE> 21
16
to environmental matters or against any indemnification obligations associated
with such Asset Sale or Recovery Event, and (b) when used in respect of the
incurrence of Indebtedness by the Borrower or any of its Subsidiaries, the gross
proceeds received by such Person in Cash and Cash Equivalents from such
incurrence less all legal expenses, commissions and other fees and expenses
incurred or to be incurred in connection therewith.
"NHO CANADA": NHO Canada Holding, Inc., a Delaware corporation.
"1997 10-K": the Borrower's annual report on Form 10-K filed with the
Securities and Exchange Commission for its fiscal year ended December 31, 1997.
"NON-EXCLUDED TAXES": as defined in subsection 2.18.
"NOTES": the collective reference to any promissory notes evidencing
the Loans.
"OBLIGATIONS": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent or to
any Lender (or, in the case of Interest Rate Protection Agreements, any
affiliate of any Lender), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, this Agreement, any other Loan Document,
the Letters of Credit, any Interest Rate Protection Agreement entered into with
any Lender or any affiliate of any Lender or any other document made, delivered
or given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees, charges and disbursements of counsel
to the Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise.
"PARTICIPANT": as defined in subsection 11.6(b).
"PARTICIPATING BANK": any Revolving Credit Lender (other than the
Issuing Bank) with respect to its participating interest in each Letter of
Credit; PROVIDED that each Revolving Credit Lender (including the Issuing Bank,
if a Lender) shall be deemed to be a Participating Bank with respect to any
Letter of Credit issued by the Designated Issuer.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
<PAGE> 22
17
"PERMITTED ACQUISITION": any acquisition made pursuant to subsection
7.10(g).
"PERMITTED DESIGNEE": with respect to any Permitted Holder (i) a spouse
or a child (in the case of an individual) of such Permitted Holder, (ii) any
trust for the benefit of such Permitted Holder or a spouse or child of such
Permitted Holder, (iii) in the event of the death or incompetence of such
Permitted Holder, such Permitted Holder's estate, heirs, executor,
administrator, committee or other court appointed representative, (iv) any
foundation or not for profit organization established by a Permitted Holder or
(v) any Person so long as a Permitted Holder is the "beneficial owner" (as
defined in clause (i) of the definition of "Change in Control") of at least 51%
of the Voting Stock of such Person.
"PERMITTED HOLDERS": Paul M. Meister, Paul M. Montrone, Richard R.
Russell and their Permitted Designees.
"PERMITTED INVESTMENTS": Investments permitted by subsection 7.10.
"PERMITTED SUBORDINATED INDEBTEDNESS": unsecured Indebtedness of the
Borrower which (i) is subordinated in right of payment to all Obligations of the
Borrower on terms reasonably satisfactory to the Required Lenders (and, if such
Indebtedness is guaranteed by any Subsidiary of the Borrower, such guarantee is
subordinated in right of payment to all obligations of such Subsidiary under the
Loan Documents on terms reasonably satisfactory to the Required Lenders), (ii)
contains covenants and events of default which, taken as a whole, are
substantially similar to those applicable to the Tranche B Term Loan Facility
under this Agreement or are otherwise reasonably satisfactory to the Required
Lenders and (iii) has no scheduled or mandatory payments in respect of principal
(whether by scheduled amortization, redemption, purchase or otherwise) prior to
June 30, 2006.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGED STOCK": as defined in the Guarantee and Pledge Agreement.
"PRICING GRID": the pricing grid attached hereto as Annex A.
"PRODUCTIVE ASSETS": assets (including Capital Stock of a Person that
directly or indirectly owns assets) of a kind used or usable in the Borrower's
business, or related to such business, as conducted on the date of the relevant
Asset Sale or Recovery Event.
<PAGE> 23
18
"PRO FORMA BALANCE SHEET": as defined in subsection 4.1(b).
"PROPERTIES": as defined in subsection 4.16.
"QUALIFYING ESOP PURCHASES": at any time, an amount equal to the
aggregate Net Cash Proceeds theretofore received by the Borrower from the
issuance or sale of shares of its Capital Stock (excluding Redeemable Stock) to
an ESOP after April 1, 1998; provided that if such ESOP issues any Indebtedness
for which the Borrower or any of its Subsidiaries has a Guarantee Obligation or
is otherwise liable, such aggregate Net Cash Proceeds shall be counted only to
the extent of any increase in the Consolidated Net Worth of the Borrower
theretofore resulting from principal repayments made by such ESOP with respect
to Indebtedness issued by it to finance the purchase of such shares.
"RECOVERY EVENT": any settlement of or payment in excess of $500,000 in
any transaction or series of related transactions in respect of any property or
casualty insurance claim or any condemnation proceeding relating to any asset of
the Borrower or any of its Subsidiaries.
"REDEEMABLE STOCK": any class or series of Capital Stock that (i) by
its terms or otherwise is required to be redeemed prior to June 30, 2006, (ii)
is redeemable at the option of the holder thereof at any time prior to June 30,
2006 or (iii) is exchangeable into any Capital Stock described in clause (i) or
(ii) above.
"REFINANCING": the collective reference to (i) the execution and
delivery of this Agreement and the making of the initial Loans hereunder, (ii)
the repayment in full and cancellation of the Existing Credit Agreements with
the proceeds of a portion of the initial Loans hereunder and (iii) the cash
collateralization of the Existing Subordinated Notes with the proceeds of a
portion of the initial Loans hereunder and the delivery of an irrevocable notice
of redemption by the Borrower to the trustee under the Existing Subordinated
Indenture requiring the redemption of the Existing Subordinated Notes on or
prior to August 31, 1998.
"REFINANCING INDEBTEDNESS": as defined in subsection 7.2(o).
"REGISTER": as defined in subsection 11.6(d).
"REGULATION U": Regulation U of the Board as in effect from time to
time.
"REHEIS IRELAND CREDIT FACILITY": as defined in subsection 7.2(f).
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to reimburse
the Issuing Banks pursuant to subsection 3.5(a) for amounts drawn under Letters
of Credit.
"REINVESTMENT DEFERRED AMOUNT": with respect to any Reinvestment Event,
the aggregate Net Cash Proceeds received by the Borrower or any of its
Subsidiaries in
<PAGE> 24
19
connection therewith which are not applied to prepay the Term Loans or reduce
the Revolving Credit Commitments pursuant to subsection 2.9(d) as a result of
the delivery of a Reinvestment Notice.
"REINVESTMENT EVENT": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"REINVESTMENT NOTICE": a written notice executed by a Responsible
Officer stating that no Event of Default has occurred and is continuing and that
the Borrower (directly or indirectly through a Subsidiary) intends and expects
to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or
Recovery Event to acquire Productive Assets.
"REINVESTMENT PREPAYMENT AMOUNT": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire
Productive Assets.
"REINVESTMENT PREPAYMENT DATE": with respect to any Reinvestment Event,
the earlier of (a) the date occurring one year after such Reinvestment Event and
(b) the date on which the Borrower shall have determined not to acquire
Productive Assets with all or any portion of the relevant Reinvestment Deferred
Amount.
"REORGANIZATION": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Sec. 2615.
"REQUIRED BASIC LENDERS": at any time, Revolving Credit Lenders and
Tranche A Term Loan Lenders the Total Credit Percentages (calculated for this
purpose without giving effect to any outstanding Tranche B Term Loans) of which
aggregate more than 50%.
"REQUIRED LENDERS": at any time, Lenders the Total Credit Percentages
of which aggregate more than 50%.
"REQUIRED RELEASE LENDERS": at any time (i) Required Basic Lenders and
(ii) Tranche B Term Loan Lenders the Tranche B Term Loan Percentages of which
aggregate more than 50%.
"REQUIRED TRANCHE B TERM LOAN LENDERS": at any time, Tranche B Term
Loan Lenders the Tranche B Term Loan Percentages of which aggregate more than
50%.
"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law,
<PAGE> 25
20
treaty, rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"RESPONSIBLE OFFICER": the chief executive officer, the president or
any vice president of the Borrower or GenChem or, with respect to financial
matters, the chief financial officer of the Borrower or GenChem.
"RESTRICTED INVESTMENT": any Investment other than those permitted by
clauses (a) - (i) of subsection 7.10.
"RESTRICTED PAYMENT": as defined in subsection 7.8.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of such
Lender, if any, to make Revolving Credit Loans and participate in Letters of
Credit, in an aggregate principal and/or face amount not to exceed the amount
set forth under the heading "Revolving Credit Commitment" opposite such Lender's
name on Schedule I, as the same may be changed from time to time pursuant to the
terms hereof.
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including the
Closing Date to the Revolving Credit Termination Date.
"REVOLVING CREDIT LENDER": each Lender which has a Revolving Credit
Commitment or which is the holder of Revolving Credit Loans.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT PERCENTAGE": as to any Revolving Credit Lender at any
time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the Total Revolving Credit Commitments (or, at any time after the
Revolving Credit Commitments shall have expired or terminated, the percentage
which the aggregate principal amount of such Lender's Revolving Credit Loans
then outstanding constitutes of the aggregate principal amount of the Revolving
Credit Loans then outstanding).
"REVOLVING CREDIT TERMINATION DATE": June 15, 2004.
"REVOLVING EXTENSIONS OF CREDIT": as to any Revolving Credit Lender at
any time, an amount equal to the sum of (a) the aggregate principal amount of
all Revolving Credit Loans made by such Lender then outstanding and (b) such
Lender's Revolving Credit Percentage of the L/C Obligations then outstanding.
"RICHMOND LITIGATION": all suits, claims and other litigation arising
out of the explosion on July 26, 1993 at the Borrower's Richmond, California
plant which led to the release of sulfur trioxide into the atmosphere.
"SANDCO": Sandco Automotive Ltd., an Ontario corporation.
<PAGE> 26
21
"SANDCO CREDIT FACILITY": the Credit Facility dated as of February 6,
1998 in the original principal amount of C$10,000,000 by and between Sandco and
The Bank of Nova Scotia, as the same may be amended, modified, supplemented,
replaced or refinanced from time to time.
"SECURITY DOCUMENTS": the collective reference to the Guarantee and
Pledge Agreement and all other documents or instruments hereafter delivered to
or for the benefit of the Administrative Agent and the Lenders granting a Lien
on any asset or assets of any Person to secure the obligations and liabilities
of the Borrower hereunder, under the Notes and/or under any of the other Loan
Documents or to secure any guarantee of any such obligations and liabilities.
"SENIOR LEVERAGE RATIO": as at the last day of any fiscal quarter of
the Borrower, the ratio of (a) Consolidated Total Indebtedness less the amount
of Permitted Subordinated Indebtedness as at such day to (b) Consolidated Cash
Flow for the period of four fiscal quarters ending on such day.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"SODA ASH PARENT AGREEMENT": the Amended and Restated Parent Guaranty
and Transfer Agreement dated June 30, 1992 and executed by New Hampshire Oak,
Inc., ACI International Limited and TOSOH America, Inc., as the same may be
amended, modified or supplemented from time to time.
"SODA ASH PARTNERS": General Chemical (Soda Ash) Partners, a Delaware
general partnership.
"SODA ASH PARTNERSHIP AGREEMENT": the Second Amended and Restated
Partnership Agreement of General Chemical (Soda Ash) Partners, dated June 30,
1992 and executed by the Borrower, AGI and TOSOH, setting forth the respective
rights and duties of the general partners of Soda Ash Partners, as such
agreement may be amended, supplemented, replaced or otherwise modified from time
to time in accordance with subsection 7.11.
"SOLVENT": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim",
<PAGE> 27
22
and (ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"S&P": Standard & Poor's Ratings Services Group, a division of The
McGraw-Hill Companies, Inc.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrower, which shall include, without limitation, Soda Ash Partners.
"SUBSIDIARY GUARANTOR": each Domestic Subsidiary of the Borrower other
than (i) Soda Ash Partners and (ii) any Domestic Subsidiary less than 80% of the
common Equity Interests of which is owned by the Borrower or its other
Subsidiaries.
"TERM LOAN LENDERS": the collective reference to the Tranche A Term
Loan Lenders and the Tranche B Term Loan Lenders.
"TERM LOANS": the collective reference to the Tranche A Term Loans and
Tranche B Term Loans.
"TOSOH": TOSOH Wyoming, Inc., a Delaware corporation.
"TOTAL CREDIT PERCENTAGE": as to any Lender at any time, the percentage
of the aggregate Revolving Credit Commitments, outstanding Tranche A Term Loans
and outstanding Tranche B Term Loans then constituted by its Revolving Credit
Commitment, outstanding Tranche A Term Loans and outstanding Tranche B Term
Loans (or, if the Revolving Credit Commitments have terminated or expired, the
percentage of the aggregate outstanding Revolving Credit Loans, outstanding Term
Loans and interests in the outstanding L/C Obligations then constituted by its
outstanding Revolving Credit Loans, outstanding Term Loans and interests in
outstanding L/C Obligations).
"TOTAL REVOLVING CREDIT COMMITMENTS": at any time, the aggregate amount
of the Revolving Credit Commitments then in effect. The original amount of the
Total Revolving Credit Commitments is $300,000,000.
<PAGE> 28
23
"TOTAL REVOLVING EXTENSIONS OF CREDIT": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Credit Lenders
outstanding at such time.
"TRANCHE A TERM LOAN": as defined in Section 2.3(a).
"TRANCHE A TERM LOAN COMMITMENT": as to any Lender, the obligation of
such Lender, if any, to make a Tranche A Term Loan to the Borrower hereunder in
a principal amount not to exceed the amount set forth under the heading "Tranche
A Term Loan Commitment" opposite such Lender's name on Schedule I. The original
aggregate amount of the Tranche A Term Loan Commitments is $100,000,000.
"TRANCHE A TERM LOAN LENDER": each Lender which has a Tranche A Term
Loan Commitment or is the holder of a Tranche A Term Loan.
"TRANCHE A TERM LOAN PERCENTAGE": as to Tranche A Term Loan Lender at
any time, the percentage which such Lender's Tranche A Term Loan Commitment then
constitutes of the aggregate Tranche A Term Loan Commitments (or, at any time
after the Closing Date, the percentage which the aggregate principal amount of
such Lender's Tranche A Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche A Term Loans then outstanding).
"TRANCHE B TERM LOAN": as defined in Section 2.3(b).
"TRANCHE B TERM LOAN COMMITMENT": as to any Lender, the obligation of
such Lender, if any, to make a Tranche B Term Loan to the Borrower hereunder in
a principal amount not to exceed the amount set forth under the heading "Tranche
B Term Loan Commitment" opposite such Lender's name on Schedule I thereto. The
original aggregate amount of the Tranche B Term Loan Commitments is
$200,000,000.
"TRANCHE B TERM LOAN LENDER": each Lender which has a Tranche B Term
Loan Commitment or which is the holder of a Tranche B Term Loan.
"TRANCHE B TERM LOAN PERCENTAGE": as to any Lender at any time, the
percentage which such Lender's Tranche B Term Loan Commitment then constitutes
of the aggregate Tranche B Term Loan Commitments (or, at any time after the
Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding); PROVIDED, that
solely for purposes of calculating the amount of each installment of Tranche B
Term Loans (other than the last installment) payable to a Tranche B Term Loan
Lender pursuant to Section 2.5(b), such Term Loan Lender's Tranche B Term Loan
Percentage shall be calculated without giving effect to any portion of any prior
mandatory or optional prepayment attributable to such Term Loan Lender's Tranche
B Term Loans which shall have been declined by such Term Loan Lender (or, in the
case of any Term Loan Lender
<PAGE> 29
24
which shall have acquired its Tranche B Term Loans by assignment from another
Person, by such other Person).
"TRANSFEREE": as defined in subsection 11.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"VOTING STOCK": Capital Stock of a Person normally entitled to vote in
the election of directors (or other persons exercising similar functions) of
such Person.
"WHOLLY OWNED SUBSIDIARY": of any Person, a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes and the other Loan Documents or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes and the other Loan Documents, and
any certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Borrower and its Subsidiaries not defined in subsection
1.1 and accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("REVOLVING CREDIT LOANS") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which,
<PAGE> 30
25
when added to such Lender's Revolving Credit Percentage of then outstanding L/C
Obligations, does not exceed the amount of such Lender's Revolving Credit
Commitment. During the Revolving Credit Commitment Period the Borrower may use
the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit
Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with subsections
2.2 and 2.10, provided that no Loan shall be made as a Eurodollar Loan after the
day that is one month prior to the Revolving Credit Termination Date.
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, PROVIDED that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans or (b) one Business
Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the amounts of such
Type of Loan and the lengths of the initial Interest Periods therefor. Each
borrowing under the Revolving Credit Commitments shall be in an amount equal to
(x) in the case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if
then Available Revolving Credit Commitments are less than $1,000,000, such
lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Borrower, the Administrative Agent shall promptly notify each Lender
thereof. Each Revolving Credit Lender will make the amount of its pro rata share
of each borrowing available to the Administrative Agent for the account of the
Borrower at the office of the Administrative Agent specified in subsection 11.2
prior to 11:00 A.M., New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Administrative Agent by the
Revolving Credit Lenders and in like funds as received by the Administrative
Agent.
2.3 TERM LOAN COMMITMENTS. Subject to the terms and conditions hereof
(a) each Tranche A Term Loan Lender severally agrees to make a term loan (a
"TRANCHE A TERM LOAN") to the Borrower on the Closing Date in an amount not to
exceed the amount of the Tranche A Term Loan Commitment of such Lender and (b)
each Tranche B Term Loan Lender severally agrees to make a term loan (a "TRANCHE
B TERM LOAN") to the Borrower on the Closing Date in an amount not to exceed the
amount of the Tranche B Term Loan Commitment of such Lender. The Tranche A Term
Loans and Tranche B Term Loans may from time to time be Eurodollar Loans or ABR
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with subsections 2.4 and 2.10.
<PAGE> 31
26
2.4 PROCEDURE FOR TERM LOAN BORROWING. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, one Business Day
prior to the anticipated Closing Date) requesting that the Term Loan Lenders
make the Term Loans on the Closing Date and specifying the amount to be
borrowed. Upon receipt of such notice the Administrative Agent shall promptly
notify each Term Loan Lender thereof. Not later than 12:00 Noon, New York City
time, on the Closing Date each Term Loan Lender shall make available to the
Administrative Agent at the office of the Administrative Agent specified in
subsection 11.2 an amount in immediately available funds equal to the Term Loan
or Term Loans to be made by such Lender. The Administrative Agent shall credit
to the account of the Borrower on the books of such office the aggregate of the
amounts made available to the Administrative Agent by the Term Loan Lenders in
immediately available funds.
2.5 REPAYMENT OF TERM LOANS. (a) The Tranche A Term Loan of each
Tranche A Lender shall mature in consecutive quarterly installments on the dates
set forth below, each of which shall be in an amount equal to such Lender's
Tranche A Term Loan Percentage multiplied by the amount set forth below opposite
such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
March 31, 2000 $1,250,000
June 30, 2000 $1,250,000
September 30, 2000 $1,250,000
December 31, 2000 $1,250,000
March 31, 2001 $1,250,000
June 30, 2001 $1,250,000
September 30, 2001 $3,125,000
December 31, 2001 $3,125,000
March 31, 2002 $3,125,000
June 30, 2002 $3,125,000
September 30, 2002 $7,500,000
December 31, 2002 $7,500,000
March 31, 2003 $7,500,000
June 30, 2003 $7,500,000
September 30, 2003 $12,500,000
December 31, 2003 $12,500,000
March 31, 2004 $12,500,000
June 15, 2004 $12,500,000
</TABLE>
(b) The Tranche B Term Loan of each Tranche B Lender shall mature in
consecutive quarterly installments on the dates set forth below, each of which
shall be in an amount equal to such Lender's Tranche B Term Loan Percentage
multiplied by the amount set forth below opposite such installment:
<PAGE> 32
27
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
September 30, 1998 $500,000
December 31, 1998 $500,000
March 31, 1999 $500,000
June 30, 1999 $500,000
September 30, 1999 $500,000
December 31, 1999 $500,000
March 31, 2000 $500,000
June 30, 2000 $500,000
September 30, 2000 $500,000
December 31, 2000 $500,000
March 31, 2001 $500,000
June 30, 2001 $500,000
September 30, 2001 $500,000
December 31, 2001 $500,000
March 31, 2002 $500,000
June 30, 2002 $500,000
September 30, 2002 $500,000
December 31, 2002 $500,000
March 31, 2003 $500,000
June 30, 2003 $500,000
September 30, 2003 $500,000
December 31, 2003 $500,000
March 31, 2004 $500,000
June 30, 2004 $500,000
September 30, 2004 $500,000
December 31, 2004 $500,000
March 31, 2005 $500,000
June 30, 2005 $500,000
September 30, 2005 $46,500,000
December 31, 2005 $46,500,000
March 31, 2006 $46,500,000
June 15, 2006 $46,500,000
</TABLE>
2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be,
(i) the then unpaid principal amount of each Revolving Credit Loan of such
Revolving Credit Lender on the Revolving Credit Termination Date (or such
earlier date on which the Loans become due and payable pursuant to Section 9)
and (ii) the principal amount of each Term Loan of such Term Loan Lender in
installments according to the amortization schedule set forth in subsection 2.5
(or on such earlier date on which the Loans become due and payable pursuant to
Section 9). The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 2.12.
<PAGE> 33
28
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall maintain
the Register pursuant to subsection 11.6(d), and a subaccount therein for each
Lender, in which shall be recorded (i) the amount of each Loan made hereunder
and any Note evidencing such Loan, the Type thereof and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Borrower to each Lender hereunder and
(iii) both the amount of any sum received by the Administrative Agent hereunder
from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.6(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the Borrower evidencing any Term Loans or Revolving Credit
Loans, as the case may be, of such Lender, substantially in the forms of Exhibit
F-1 or F-2, respectively, with appropriate insertions as to date and principal
amount.
2.7 COMMITMENT FEE.(a) Subject to subsection 2.15(b)(ii), the Borrower
agrees to pay to the Administrative Agent for the account of each Lender a
commitment fee for the period from and including the first day of the Revolving
Credit Commitment Period to the Revolving Credit Termination Date, computed at
the Commitment Fee Rate on and after the Closing Date, on the average daily
amount of the Available Revolving Credit Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Revolving Credit
Termination Date or such earlier date as the Revolving Credit Commitments shall
terminate as provided herein, commencing on the first of such dates to occur
after the Closing Date.
(b) The Borrower agrees to pay to the Administrative Agent, the
Syndication Agent and the Documentation Agent the fees in the amounts and on the
dates from time to time agreed to in writing by the Borrower and the
Administrative Agent, Syndication Agent and Documentation Agent, respectively.
2.8 OPTIONAL TERMINATION OR REDUCTION OF REVOLVING CREDIT
COMMITMENTS. The Borrower shall have the right, upon not less than five Business
Days' notice to the Administrative Agent, to terminate the Revolving Credit
Commitments or, from time to time,
<PAGE> 34
29
to reduce the amount of the Revolving Credit Commitments, PROVIDED that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Credit Loans then
outstanding, when added to then outstanding L/C Obligations, would exceed the
Revolving Credit Commitments then in effect. Any such partial reduction shall be
in an amount equal to $1,000,000 or a whole multiple thereof and shall reduce
permanently the Revolving Credit Commitments then in effect.
2.9 OPTIONAL PREPAYMENTS; MANDATORY PREPAYMENTS AND COMMITMENT
REDUCTIONS. (a) The Borrower may on the last day of any Interest Period with
respect thereto, in the case of Eurodollar Loans, or at any time and from time
to time, in the case of ABR Loans, prepay the Loans, in whole or in part,
without premium (except, in the case of Tranche B Term Loans, as set forth below
in the last sentence of this paragraph (a)) or penalty, upon at least three
Business Days' irrevocable notice in the case of Eurodollar Loans, and upon at
least one Business Day's irrevocable notice in the case of ABR Loans, to the
Administrative Agent, specifying the date and amount of prepayment and whether
the prepayment is of (i) Term Loans, Revolving Credit Loans or a combination
thereof and (ii) Eurodollar Loans, ABR Loans or a combination thereof, and, if
of a combination thereof, the amount allocable to each. Upon receipt of any such
notice the Administrative Agent shall promptly notify each affected Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with any amounts
payable pursuant to subsection 2.19 and, in the case of prepayments of the Term
Loans only, accrued interest to such date on the amount prepaid. Optional
prepayment of the Tranche B Term Loans shall be accompanied by a ratable
prepayment of the Tranche A Term Loans (based on the respective outstanding
principal amounts thereof) until the Tranche A Term Loans are paid in full and
then by a ratable reduction in the Revolving Credit Commitments (based on the
respective outstanding principal amounts of the Tranche B Term Loans and the
aggregate amount of the Revolving Credit Commitments). Partial prepayments of
the Term Loans shall be applied PRO RATA to the respective installments of
principal thereof; provided however that Revolving Credit Loans and Tranche A
Term Loans may be prepaid without prepayment of Tranche B Term Loans. Partial
prepayments shall be in an aggregate principal amount of $1,000,000 or a whole
multiple thereof. Optional prepayments of the Tranche B Term Loans under this
subsection 2.9(a) shall be accompanied by a prepayment premium on the principal
amount prepaid equal to (A) 3% to the first anniversary of the Closing Date, (B)
2% thereafter to the second anniversary of the Closing Date and (c) 1%
thereafter to the third anniversary of the Closing Date.
(b) If, at any time during the Revolving Credit Commitment Period, the
aggregate Revolving Credit Extensions of Credit exceed the aggregate Revolving
Credit Commitments then in effect, the Borrower shall, without notice or demand,
immediately repay the Revolving Credit Loans in an aggregate principal amount
equal to such excess, together with interest accrued to the date of such payment
or prepayment and any amounts payable under subsection 2.19. To the extent that
after giving effect to any prepayment of the Revolving Credit Loans required by
the preceding sentence, the aggregate Revolving Credit Extensions of Credit
exceed the aggregate Revolving Credit Commitments then in effect, the
<PAGE> 35
30
Borrower shall, without notice or demand, immediately cash collateralize the
then outstanding L/C Obligations in an amount equal to such excess in accordance
with paragraph (h) below.
(c) If any Indebtedness shall be incurred by the Borrower or any of its
Subsidiaries (other than Indebtedness permitted to be incurred under subsection
7.2 as in effect on the Closing Date, including Indebtedness the proceeds of
which are used to finance Permitted Acquisitions), an amount equal to 100% of
the Net Cash Proceeds thereof shall be applied on the date of such issuance or
incurrence toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in subsection 2.9(g) and subject to
subsection 2.9(f).
(d) If on any date the Borrower or any of its Subsidiaries shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event then (i) unless
a Reinvestment Notice shall be delivered in respect thereof, such Net Cash
Proceeds shall be applied on such date toward the prepayment of the Term Loans
and the reduction of the Revolving Credit Commitments as set forth in subsection
2.9(g) and subject to subsection 2.9(f) or (ii) if a Reinvestment Notice has
been delivered in respect thereof, on each Reinvestment Prepayment Date, an
amount equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans and
the reduction of the Revolving Credit Commitments as set forth in subsection
2.9(g). Notwithstanding the foregoing, all Net Cash Proceeds in excess of
$50,000,000 received in any fiscal year shall be applied toward the prepayment
of the Term Loans and the reduction of the Revolving Credit Commitments as set
forth in subsection 2.9(g).
(e) On the date of any Change in Control the Borrower shall prepay the
Tranche B Term Loans, subject to subsection 2.9(f). Each such prepayment
pursuant to this paragraph (e) shall be accompanied by a prepayment premium of
1% on the principal amount prepaid.
(f) Notwithstanding anything to the contrary in this subsection 2.9, so
long as any Tranche A Term Loans are outstanding, each Tranche B Term Loan
Lender may, at its option, decline the portion of any mandatory payment
applicable to the Tranche B Term Loans of such Lender; accordingly, with respect
to the amount of any mandatory prepayment described in this subsection 2.9 that
is allocated to Tranche B Term Loans (such amounts, the "TRANCHE B PREPAYMENT
AMOUNT") at any time when Tranche A Term Loans remain outstanding, the Borrower
will in the case of any mandatory prepayment required to be made pursuant to
this subsection 2.9, in lieu of applying such amount to the prepayment of
Tranche B Term Loans, as provided in subsection 2.9(g), on the date specified in
this subsection 2.9 for such prepayment, give the Administrative Agent
telephonic notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Tranche B Lender a notice
(each, a "PREPAYMENT OPTION NOTICE") as described below. As promptly as
practicable after receiving such notice from the Borrower, the Administrative
Agent will send to each Tranche B Term Loan Lender a Prepayment Option Notice,
which shall be in the form of Exhibit G, and shall include an offer by the
Borrower to prepay on the date (each a "PREPAYMENT DATE") that is 10 Business
Days after the date of the Prepayment Option Notice the Tranche B Term Loans of
such Lender by an amount equal to the portion of the Tranche
<PAGE> 36
31
B Prepayment Amount indicated in such Lender's Prepayment Option Notice as being
applicable to such Lender's Tranche B Term Loans. On the Prepayment Date (i) the
Borrower shall pay to the Administrative Agent the aggregate amount necessary to
prepay that portion of the outstanding Tranche B Term Loans in respect of which
Tranche B Term Loan Lenders have accepted prepayment as described above (such
Lenders, the "ACCEPTING LENDERS"), and such amount shall be applied to reduce
the Tranche B Prepayment Amounts with respect to each Accepting Lender, (ii)
subject to the following clause (iii), the Borrower shall pay to the
Administrative Agent an amount equal to the portion of the Tranche B Prepayment
Amount not accepted by the Accepting Lenders, and such amount shall be applied
to the prepayment of the Tranche A Term Loans and the Tranche B Term Loans held
by Tranche B Term Loan Lenders who are Accepting Lenders (ratably based on the
respective outstanding principal amounts thereof), and (iii) if the prepayment
giving rise to a Prepayment Option Notice is a result of a Change in Control,
the Borrower shall be entitled to retain the remaining portion of the Tranche B
Prepayment Amount not accepted by the Accepting Lenders.
(g) Amounts to be applied in connection with prepayments and Revolving
Credit Commitment reductions made pursuant to this subsection 2.9 shall be
applied, FIRST, to the prepayment of the Term Loans and, SECOND, to reduce
permanently the Revolving Credit Commitments. Any such reduction of the
Revolving Credit Commitments shall be accompanied by prepayment of the Revolving
Credit Loans to the extent, if any, that the Total Revolving Extensions of
Credit exceed the amount of the Total Revolving Credit Commitments as so
reduced, PROVIDED that if the aggregate principal amount of Revolving Credit
Loans then outstanding is less than the amount of such excess (because L/C
Obligations constitute a portion thereof), the Borrower shall, to the extent of
the balance of such excess, replace outstanding Letters of Credit and/or deposit
an amount in cash in a cash collateral account established with the
Administrative Agent for the benefit of the Lenders in accordance with paragraph
(h) below. The application of any prepayment pursuant to this subsection shall
be made first to ABR Loans and second to Eurodollar Loans. Each prepayment of
the Loans under this subsection 2.9 (except in the case of Revolving Credit
Loans that are ABR Loans) shall be accompanied by accrued interest to the date
of such prepayment on the amount prepaid.
(h) The cash collateralization of L/C Obligations shall be accomplished
by the Borrower depositing an amount equal to such L/C Obligations in a cash
collateral account opened by the Administrative Agent. This account shall bear
interest which shall, so long as no Event of Default has occurred and is
continuing, be payable to the Borrower (and, if an Event of Default shall have
occurred, such interest shall remain in such account until such Event of Default
ceases to exist or the Administrative Agent has applied such interest to payment
of the Obligations). The Borrower shall have no right to withdraw any amount
from such cash collateral account; PROVIDED that, so long as no Default or Event
of Default has occurred and is continuing or would result therefrom, the
Administrative Agent shall, from time to time, release an amount of cash
collateral equal to the excess of all cash collateral then on deposit in such
cash collateral account over the then outstanding L/C Obligations and accrued
interest thereon. The Borrower hereby grants to the Administrative Agent, for
the benefit of the Issuing Banks and the Participating Banks, a security
interest in such cash
<PAGE> 37
32
collateral (in whatever form) and the proceeds thereof to secure all such L/C
Obligations. Amounts held in such cash collateral account shall be applied by
the Administrative Agent to the payment of such L/C Obligations. The Borrower
shall execute and deliver to the Administrative Agent, for the account of the
Issuing Banks and the Participating Banks, such further documents and
instruments as the Administrative Agent may reasonably request to evidence the
creation and perfection of such security interest in such cash collateral
account.
(i) Each payment (including each prepayment) by the Borrower on account
of principal of and interest on the Term Loans shall be made PRO RATA according
to the respective outstanding principal amounts of the Term Loans then held by
the Term Loan Lenders (except as otherwise provided in paragraph (f) above). The
amount of each principal prepayment of the Term Loans shall be applied to reduce
the then remaining installments of the Tranche A Term Loans and Tranche B Term
Loans, as the case may be, PRO RATA based upon the then remaining principal
amount thereof. Amounts prepaid on account of the Term Loans may not be
reborrowed.
2.10 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, PROVIDED that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each affected Lender thereof. All or any part of outstanding Eurodollar Loans
and ABR Loans may be converted as provided herein, PROVIDED that (i) no Loan may
be converted into a Eurodollar Loan under a particular Facility when any Event
of Default has occurred and is continuing and the Administrative Agent has or
the Majority Facility Lenders under such Facility have determined not to permit
such conversions and (ii) no Loan under a particular Facility may be converted
into a Eurodollar Loan after the date that is one month prior to the final
scheduled termination or maturity date of such Facility.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, in accordance with the applicable provisions
of the term "Interest Period" set forth in subsection 1.1, of the length of the
next Interest Period to be applicable to such Loans, PROVIDED that no Eurodollar
Loan under a particular Facility may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has or the
Majority Facility Lenders under such Facility have determined not to permit such
continuations or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of such Facility and PROVIDED, FURTHER,
that if the Borrower shall fail to give any required notice as described above
in this paragraph or if such continuation is not permitted pursuant to the
preceding proviso such Loans shall be automatically converted to ABR Loans on
the last day of such then expiring Interest Period.
<PAGE> 38
33
2.11 MINIMUM AMOUNTS OF TRANCHES. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the Loans
comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole
multiple of $1,000,000 in excess thereof.
2.12 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum which is (x) in the case of overdue principal, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% or (y), to the extent permitted by applicable law, in the
case of overdue interest, commitment fee or other amount, the rate described in
paragraph (b) for the applicable Facility (or, if there is no applicable
Facility, for the Revolving Credit Facility) of this subsection plus 2%, in each
case from the date of such non-payment until such amount is paid in full (as
well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this subsection
shall be payable from time to time on demand.
2.13 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees, commissions
and interest shall be calculated on the basis of a 360-day year for the actual
days elapsed, except that, with respect to ABR Loans the rate of interest on
which is calculated on the basis of the Prime Rate, interest thereon shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed. The Administrative Agent shall as soon as practicable
notify the Borrower and the affected Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the affected Lenders of the effective date and the amount of each
such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsection 2.12(a).
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2.14 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Majority Facility Lenders in respect of the relevant Facility that
the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted on
the first day of such Interest Period to Eurodollar Loans under the relevant
Facility shall be converted to or continued as ABR Loans and (z) any outstanding
Eurodollar Loans under the relevant Facility shall be converted, on the first
day of such Interest Period, to ABR Loans. Until such notice has been withdrawn
by the Administrative Agent, no further Eurodollar Loans under the relevant
Facility shall be made or continued as such, nor shall the Borrower have the
right to convert Loans under the relevant Facility to Eurodollar Loans.
2.15 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee hereunder and any reduction of the Commitments of the Lenders
shall be made pro rata according to the respective Tranche A Term Loan
Percentages, Tranche B Term Loan Percentages or Revolving Credit Commitment
Percentages, as the case may be, of the relevant Lenders. Each payment (other
than prepayments) on account of principal of and interest on the Loans, each
payment in respect of fees payable hereunder and each payment in respect of
Reimbursement Obligations shall be applied to the amounts of such obligations
owing to the Lenders PRO RATA according to the respective amounts then due and
owing to the Lenders, except to the extent otherwise required by clause (ii) of
subsection 2.15(b), by subsection 2.18 or by subsection 2.21. All payments
(including prepayments) to be made by the Borrower hereunder, whether on account
of principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 Noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of the Lenders, at
the Administrative Agent's office specified in subsection 11.2, in Dollars and
in immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at then applicable rate during such
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extension. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension of
any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender (any such Lender, a
"NON-FUNDING LENDER") within three Business Days of such Borrowing Date, (i) the
Administrative Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to ABR Loans under the relevant
Facility, on demand, from the Borrower, (ii) the commitment fee of such
Non-Funding Lender referred to in subsection 2.7 shall not accrue during the
period commencing on such Borrowing Date and ending on the date on which such
Non-Funding Lender makes available to the Administrative Agent its share of such
borrowing and (iii) the Borrower shall have the right to replace such
Non-Funding Lender in accordance with subsection 2.21.
2.16 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled; PROVIDED
that any request by the Borrower pursuant to subsection 2.2, 2.4 or 2.10 for a
Eurodollar Loan shall, as to such Lender, be deemed to be a request for an ABR
Loan, and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to ABR Loans on the respective last days of
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 2.19.
2.17 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any
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Lender with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority made subsequent to the
date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application
or any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by subsection 2.18 and taxes on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender reasonably deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or issuing or
participating in Letters of Credit or to reduce any amount receivable hereunder
in respect thereof, then, in any such case, the Borrower shall promptly pay such
Lender, within 15 days after receipt by the Borrower of a certificate referred
to in the second succeeding sentence, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower, through the Administrative
Agent, of the event by reason of which it has become so entitled. A certificate
as to any additional amounts payable pursuant to this subsection submitted by
such Lender, through the Administrative Agent, to the Borrower shall be
conclusive in the absence of manifest error. This covenant shall survive for one
hundred eighty (180) days after the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount reasonably
deemed by such Lender to be material, then from time to time, after submission
by such Lender to the Borrower (with a copy to the Administrative Agent) of a
written request therefor, the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.
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2.18 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes or franchise taxes imposed in lieu of net income taxes imposed
on the Administrative Agent or any Lender as a result of a present or former
connection between the Administrative Agent or such Lender and the jurisdiction
of the Governmental Authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative Agent or such Lender having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement or any other Loan Document). If any such non-excluded taxes, levies,
imposts, duties, charges, fees deductions or withholdings ("NON-EXCLUDED TAXES")
are required to be withheld from any amounts payable to the Administrative Agent
or any Lender hereunder, the amounts so payable to the Administrative Agent or
such Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Notes, PROVIDED, HOWEVER, that the
Borrower shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States of America or a
state thereof if such Lender fails to comply with the requirements of paragraph
(b) of this subsection. Each Lender shall promptly notify the Borrower of a
change in such Lender's tax status that would require the Borrower to withhold
and/or pay any amounts under this paragraph (a). Whenever any Non-Excluded Taxes
are payable by the Borrower, as promptly as possible thereafter the Borrower
shall send to the Administrative Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the Borrower fails
to pay any Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent the required receipts or other
required documentary evidence within 30 days of written request therefor by the
Administrative Agent or such Lender, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X) (i) before the first payment date after it becomes a party
to this Agreement (or, in the case of a Participant, before the first
payment date after it becomes a Participant) deliver to the Borrower
and the Administrative Agent (A) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may
be;
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(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and file such
forms or certifications as may reasonably be requested by the Borrower
or the Administrative Agent; and
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the
Borrower (for the benefit of the Borrower and the Administrative Agent)
that it is not a bank within the meaning of Section 881(c)(3)(A) of the
Code, (ii) agree to furnish to the Borrower on or before the date of
any payment by the Borrower, with a copy to the Administrative Agent,
(A) a certificate substantially in the form of Exhibit H (any such
certificate a "U.S. Tax Compliance Certificate") and (B) two accurate
and complete original signed copies of Internal Revenue Service Form
W-8, or successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Agreement and any Notes (and
to deliver to the Borrower and the Administrative Agent two further
copies of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recently provided form, and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the
Administrative Agent for filing and completing such forms), and (iii)
agree, to the extent legally entitled to do so, upon reasonable request
by the Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Administrative Agent) such other forms as amy be
reasonably required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to payments under
this Agreement and any Notes;
unless in the case of forms delivered pursuant to subparagraph (X)(ii) or (iii)
or (Y), an event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advises the Borrower and the Administrative
Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it
is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 11.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
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(c) If a Lender or the Administrative Agent shall become aware in its
sole and good faith judgment that it is entitled to receive a refund in respect
of Non-Excluded Taxes as to which it has received additional amounts from the
Borrower pursuant to subsection 2.18(a), it shall promptly notify the Borrower
of the availability of such refund and within 30 days after receipt of a request
by the Borrower, apply for such refund at the Borrower's expense. If any Lender
or the Administrative Agent receives a refund in respect of Non-Excluded Taxes
as to which it has received additional amounts from the Borrower pursuant to
subsection 2.18(a), it shall promptly repay such refund to the Borrower,
PROVIDED, HOWEVER, that if any Lender or the Administrative Agent receives a
refund which it must subsequently return to the applicable taxing authority
after the Borrower has already been repaid, the Borrower agrees to promptly
return the amount of such repayment to the Lender or Administrative Agent.
2.19 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any reasonably foreseeable loss or expense which
such Lender may sustain or incur caused by (a) default by the Borrower in making
a borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a payment or prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification shall include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.20 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.17 or 2.18(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; PROVIDED, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and PROVIDED, FURTHER, that nothing in this subsection shall
affect or postpone any of the obligations of any Borrower or the rights of any
Lender pursuant to Section 2.17 or 2.18(a).
2.21 REPLACEMENT OF LENDERS UNDER CERTAIN CIRCUMSTANCES. The Borrower
shall be permitted to replace any Lender which (a) requests reimbursement for
amounts owing pursuant to Section 2.17 or 2.18 or (b) defaults in its obligation
to make Loans hereunder,
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with a replacement financial institution; PROVIDED that (i) such replacement
does not conflict with any Requirement of Law, (ii) no Event of Default shall
have occurred and be continuing at the time of such replacement, (iii) prior to
any such replacement, such Lender shall have taken no action under subsection
2.20 so as to eliminate the continued need for payment of amounts owing pursuant
to Section 2.17 or 2.18, (iv) the replacement financial institution shall
purchase, at par, all Loans and other amounts owing to such replaced Lender on
or prior to the date of replacement, (v) the Borrower shall be liable to such
replaced Lender under subsection 2.19 if any Eurodollar Loan owing to such
replaced Lender shall be purchased other than on the last day of the Interest
Period relating thereto, (vi) the replacement financial institution, if not
already a Lender, shall be reasonably satisfactory to the Administrative Agent,
(vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of subsection 11.6 (provided that the Borrower
shall be obligated to pay the registration and processing fee referred to
therein), (viii) until such time as such replacement shall be consummated, the
Borrower shall pay all additional amounts (if any) required pursuant to
subsection 2.17 or 2.18, as the case may be, and (ix) any such replacement shall
not be deemed to be a waiver of any rights which the Borrower, the
Administrative Agent or any other Lender shall have against the replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1. L/C COMMITMENT. (a) Subject to the terms and conditions hereof,
each Issuing Bank, in reliance on the agreements of the Lenders set forth in
subsection 3.4(a), agrees to issue letters of credit ("LETTERS OF CREDIT") for
the account of the Borrower on any Business Day during the Revolving Credit
Commitment Period in such form as may be approved from time to time by such
Issuing Bank; PROVIDED that neither Issuing Bank shall have any obligation to
issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the aggregate Available
Revolving Credit Commitments would be less than zero.
(b) Each Letter of Credit shall be denominated in Dollars and shall
expire no later than the earlier of (i) 365 days after its date of issuance and
(ii) five Business Days prior to the Revolving Credit Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(d) Neither Issuing Bank shall at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause such
Issuing Bank or any Participating Bank to exceed any limits imposed by, any
applicable Requirement of Law.
(e) Letters of credit issued under the Existing Revolving Credit
Agreement shall be deemed to be Letters of Credit issued under this Agreement on
the Closing Date.
3.2. PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may from
time to time request that an Issuing Bank issue a Letter of Credit by delivering
to such Issuing
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41
Bank at its address for notices specified herein an Application therefor,
completed to the satisfaction of such Issuing Bank, and such other certificates,
documents and other papers and information as such Issuing Bank may reasonably
request. Upon receipt of any Application, such Issuing Bank will process such
Application and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its customary
procedures and shall promptly issue the Letter of Credit requested thereby (but
in no event shall an Issuing Bank be required to issue any Letter of Credit
earlier than three Business Days after its receipt of the Application therefor
and all such other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by such Issuing Bank and the
Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to the
Borrower and to each Participating Bank promptly following the issuance thereof.
3.3. FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrower will pay a
fee on all outstanding Letters of Credit at a per annum rate equal to the
Applicable Margin then in effect with respect to Eurodollar Loans under the
Revolving Credit Facility, shared ratably among the Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee Payment Date after the issuance
date. In addition, the Borrower shall pay to the Issuing Lender for its own
account a fronting fee of 1/10 of 1% per annum, payable quarterly in arrears on
each L/C Fee Payment Date after the Issuance Date.
(b) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse each Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by such Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit;
provided that such costs and expenses are not paid by the Borrower under
subsections 2.19, 3.5 and/or 11.5 of this Agreement.
3.4. L/C PARTICIPATIONS. (a) Each Issuing Bank irrevocably agrees to
grant and hereby grants to each Participating Bank, and, to induce the Issuing
Banks to issue Letters of Credit hereunder, each Participating Bank irrevocably
agrees to accept and purchase and hereby accepts and purchases from each Issuing
Bank, on the terms and conditions hereinafter stated, for such Participating
Bank's own account and risk an undivided interest equal to such Participating
Bank's Revolving Credit Percentage in the relevant Issuing Bank's obligations
and rights under each Letter of Credit issued by it hereunder in accordance with
the terms hereof and the amount of each draft paid by such Issuing Bank
thereunder. Each Participating Bank unconditionally and irrevocably agrees with
each Issuing Bank that, if a draft is paid under any Letter of Credit for which
such Issuing Bank is not reimbursed in full by the Borrower in accordance with
the terms of this Agreement, such Participating Bank shall pay to such Issuing
Bank upon demand at such Issuing Bank's address for notices specified herein an
amount equal to such Participating Bank's Revolving Credit Percentage of the
amount of such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any Participating Bank to an
Issuing Bank pursuant to paragraph 3.4(a) in respect of any unreimbursed portion
of any payment made by such Issuing Bank under any Letter of Credit is paid to
such Issuing Bank after the date such payment is due, such Participating Bank
shall pay to such Issuing Bank on demand
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an amount equal to the product of (i) such amount, times (ii) the daily average
Federal funds rate, as quoted by such Issuing Bank, during the period from and
including the date such payment is required to the date on which such payment is
immediately available to such Issuing Bank, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of an Issuing Bank submitted to any
Participating Bank with respect to any amounts owing under this subsection shall
be conclusive in the absence of manifest error.
(c) Whenever, at any time after an Issuing Bank has made payment under
any Letter of Credit and has received from any Participating Bank its pro rata
share of such payment in accordance with subsection 3.4(a), the Issuing Bank
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by such
Issuing Bank), or any payment of interest on account thereof, such Issuing Bank
will distribute to such Participating Bank its pro rata share thereof; PROVIDED,
HOWEVER, that in the event that any such payment received by an Issuing Bank
shall be required to be returned by such Issuing Bank, such Participating Bank
shall return to such Issuing Bank the portion thereof previously distributed by
such Issuing Bank to it.
3.5. REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower agrees
to reimburse each Issuing Bank on each date on which such Issuing Bank notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by such Issuing Bank for the amount of (i) such draft so paid
and (ii) any stamp taxes, fees, charges or other costs or expenses incurred by
such Issuing Bank in connection with such payment. Each such payment shall be
made to such Issuing Bank at its address for notices specified herein in lawful
money of the United States of America and in immediately available funds.
(b) Subject to paragraph (c) immediately below, interest shall be
payable on any and all amounts remaining unpaid by the Borrower under this
subsection from the date such amounts become payable (whether at stated
maturity, by acceleration or otherwise) until payment in full at the rate which
would be payable on any outstanding ABR Loans under the Revolving Credit
Facility which were then overdue.
(c) So long as each of the conditions precedent specified in subsection
5.2 is satisfied at such time, each drawing under any Letter of Credit shall
constitute a request by the Borrower to the Administrative Agent for a borrowing
pursuant to subsection 2.2 of ABR Loans under the Revolving Credit Facility in
an amount equal to the lesser of (i) the then aggregate Available Revolving
Credit Commitments and (ii) the amount of such drawing. The Borrowing Date with
respect to such borrowing shall be the date of such drawing. Each Revolving
Credit Lender will make the amount of its pro rata share of such borrowing
available to the Administrative Agent at its office specified in subsection 11.2
by the close of business on such Borrowing Date (if such Lender receives notice
of such borrowing in sufficient time to fund its portion of such borrowing on
such Date, and otherwise on the next Business Day) in funds immediately
available to the Administrative Agent. Such funds will then be made available by
the Administrative Agent to the relevant Issuing Bank in satisfaction of the
Borrower's obligation to reimburse such Issuing Bank pursuant to clause
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(a) above. All ABR Loans deemed to be made pursuant to this paragraph (c) shall
constitute Revolving Credit Loans for all purposes of this Agreement.
3.6. OBLIGATIONS ABSOLUTE. (a) The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against any Issuing Bank or any beneficiary of a
Letter of Credit.
(b) The Borrower also agrees with each Issuing Bank that such Issuing
Bank shall not be responsible for, and the Borrower's Reimbursement Obligations
under subsection 3.5(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee.
(c) Neither Issuing Bank shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by an Issuing
Bank under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the Uniform Commercial
Code of the State of New York, shall be binding on the Borrower and shall not
result in any liability of such Issuing Bank to the Borrower.
3.7. LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the relevant Issuing Bank shall promptly
notify the Borrower of the date and amount thereof. The responsibility of any
Issuing Bank to the Borrower in connection with any draft presented for payment
under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
3.8. APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:
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4.1 FINANCIAL CONDITION. (a) The consolidated balance sheets of the
Borrower and its consolidated Subsidiaries as at December 31, 1997 and December
31, 1996 and the related consolidated statements of operations, changes in
equity (deficit) and cash flows for the fiscal years ended on such dates,
reported on by Deloitte & Touche LLP, copies of which have heretofore been
furnished to each Lender, present fairly in all material respects the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such dates, and the consolidated results of their operations
and their changes in equity (deficit) and consolidated cash flows for the fiscal
years then ended. The unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at March 31, 1998 and the related unaudited
consolidated statements of operations, changes in equity (deficit) and cash
flows for the three-month period ended on such date, certified by a Responsible
Officer, copies of which have heretofore been furnished to each Lender, present
fairly in all material respects the consolidated financial condition of the
Borrower and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations, their changes in equity (deficit) and their
consolidated cash flows for the three-month period then ended (subject to normal
year-end audit adjustments).
(b) The consolidated pro forma balance sheet of the Borrower and its
consolidated Subsidiaries as of March 31, 1998 (the "PRO FORMA BALANCE SHEET"),
certified by a Responsible Officer, a copy of which has heretofore been
furnished to each Lender, presents fairly in all material respects the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as of March 31, 1998 after giving effect to the Refinancing.
(c) All financial statements referred to in the preceding paragraphs
(a) and (b), including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein and, in the case of unaudited financial
statements, except for ordinary year end audit adjustments and the absence of
footnotes thereto). Neither the Borrower nor any of its consolidated
Subsidiaries had, at the date of the Pro Forma Balance Sheet and after giving
effect to the Refinancing, any material Guarantee Obligation, contingent
liability or liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, except as reflected in the Pro
Forma Balance Sheet or in the notes thereto. Except as disclosed in the 1997
10-K or the Confidential Information Memorandum, during the period from December
31, 1997 to and including the date hereof there has been no sale, transfer or
other disposition by the Borrower or any of its consolidated Subsidiaries of any
material part of its business or property and no purchase or other acquisition
of any business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of the Borrower and
its consolidated Subsidiaries at December 31, 1997.
4.2 NO CHANGE. Since December 31, 1997 there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrower and
its Subsidiaries (other than any non-Domestic Subsidiary which is not a Material
Foreign
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45
Subsidiary) (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation, if
applicable, and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except to the extent that the failure to be so
qualified and in good standing could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each Loan
Party has the power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and (in the case of the
Borrower) to borrow hereunder and have the Letters of Credit issued for its
account and has taken all necessary action (in the case of the Borrower) to
authorize the borrowings and the issuance of the Letters of Credit for its
account on the terms and conditions of this Agreement and the Applications and
(in the case of each Loan Party) to authorize the execution, delivery and
performance of the Loan Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents. This Agreement has been, and each other
Loan Document will be, duly executed and delivered on behalf of the Loan Parties
party thereto. This Agreement constitutes, and each other Loan Document when
executed and delivered will constitute, a legal, valid and binding obligation of
the Loan Parties party thereto enforceable against such Loan Parties in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
4.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof, after
giving effect to the Refinancing, will not violate any Requirement of Law or
material Contractual Obligation of the Borrower or of any of its Subsidiaries
(other than the Existing Subordinated Indenture, subject to the actions
described in subsection 5.1(j) being taken) and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation.
4.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or (b) which could reasonably be expected to have a Material
Adverse Effect. Notwithstanding the foregoing sentence, the Lenders acknowledge
that the 1997 10-K and the Confidential Information Memorandum make certain
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46
disclosure with respect to litigation, investigation and proceedings (the
"DISCLOSED LITIGATION") by and against the Borrower and its Subsidiaries and
that the items of Disclosed Litigation, in and of themselves, as reported in the
1997 10-K and the Confidential Information Memorandum, do not constitute a
Material Adverse Effect. The Lenders reserve their rights, however, with respect
to any material adverse development or event that occurs (or as to which the
Lenders obtain knowledge) with respect to the Disclosed Litigation after the
Closing Date.
4.7 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its
Subsidiaries has good record and insurable title in fee simple to, or a valid
leasehold interest in, all its material real property, and good title to, or a
valid leasehold interest in, all its other material property, and none of their
respective property is subject to any Lien except as permitted by subsection
7.3.
4.9 INTELLECTUAL PROPERTY. The Borrower and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the "INTELLECTUAL
PROPERTY"). No claim has been asserted and is pending by any Person challenging
or questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower know of
any valid basis for any such claim other than those claims which could not
reasonably be expected to have a Material Adverse Effect. The use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
4.10 TAXES. Each of the Borrower and its Subsidiaries has filed or
caused to be filed all tax returns which, to the knowledge of the Borrower, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than those not yet delinquent and those the amount
or validity of which are currently being contested in good faith by appropriate
proceedings diligently conducted and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be); no tax Lien has been filed, and, to the
knowledge of the Borrower, no claim is being asserted, with respect to any such
tax, fee or other charge.
4.11 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U or for any purpose which
violates the provisions of the
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47
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U-1 referred to in Regulation U.
4.12 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred and is continuing on the date on which this representation
is made or deemed made with respect to any Single Employer Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen and remains in effect against the
assets of the Borrower or any Commonly Controlled Entity, as of each date on
which this representation is made or deemed made. The present value of all
accrued benefits under each Single Employer Plan (based on those assumptions
used to fund such Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Plan allocable to such accrued benefits by an amount in
excess of $25,000,000. Neither the Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
Notwithstanding the foregoing, there shall be no breach of the representations
set forth in this subsection 4.12 unless the amount of any liability of the
Borrower or any Commonly Controlled Entity which arises or which could
reasonably be expected to arise in connection with the matters giving rise to
such breach, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
4.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
4.14 SUBSIDIARIES. Schedule II sets forth all the Subsidiaries of the
Borrower at the date hereof.
4.15 PURPOSE OF LOANS. The proceeds of the Revolving Credit Loans and
Letters of Credit shall be used by the Borrower for working capital and general
corporate purposes of the Borrower, including financing Permitted Acquisitions
and Permitted Investments. The proceeds of the Term Loans shall be used by
Borrower to fund in full the Refinancing and to pay fees and expenses in
connection therewith and the remainder of such proceeds shall be used for
general corporate purposes.
4.16 ENVIRONMENTAL MATTERS. (a) To the best knowledge of the Borrower,
the facilities and properties owned, leased or operated by the Borrower or any
of its Subsidiaries
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48
(the "PROPERTIES") do not contain any Hazardous Materials in amounts or
concentrations which constitute or constituted a violation of any Environmental
Law except in either case insofar as such violations in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
(b) To the best knowledge of the Borrower, the Properties and all
operations at the Properties are in compliance with all applicable Environmental
Laws except for instances of noncompliance that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect, and there is
no contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by the
Borrower or any of its Subsidiaries (the "BUSINESS") which in the aggregate
could reasonably be expected to have a Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has received any
written notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business, nor
does the Borrower have knowledge that any such notice will be received or is
being threatened except insofar as such notice or threatened notice, or any
aggregation thereof, does not involve a matter or matters that could reasonably
be expected to have a Material Adverse Effect.
(d) To the best knowledge of the Borrower, no Hazardous Materials have
been transported or disposed of from the Properties in violation of any
Environmental Law, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of the Properties in violation of any
applicable Environmental Law except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, could not reasonably
be expected to have a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business except insofar
as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, could not reasonably be expected to have a Material Adverse
Effect.
(f) To the best knowledge of the Borrower, there has been no release or
threat of release of Hazardous Materials at or from the Properties, or arising
from or related to the operations of the Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with the Business, in
violation of or in amounts or in a manner that could reasonably give rise to
liability under Environmental Laws except insofar as any such violation or
liability referred to in this paragraph, or any aggregation thereof, could not
reasonably be expected to have a Material Adverse Effect.
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(g) Notwithstanding the foregoing provisions of this subsection 4.16,
the Lenders acknowledge that the 1997 10-K and the Confidential Information
Memorandum make certain disclosure with respect to environmental matters (the
"DISCLOSED ENVIRONMENTAL MATTERS") relating to the Borrower and its Subsidiaries
and that the items of Disclosed Environmental Matters, in and of themselves, as
reported in the 1997 10-K and the Confidential Information Memorandum, do not
constitute a Material Adverse Effect. The Lenders reserve their rights, however,
with respect to any material adverse development or event that occurs (or as to
which the Lenders obtain knowledge) with respect to the Disclosed Environmental
Matters after the Closing Date.
4.17 SODA ASH PARTNERS. Except as set forth in the Soda Ash Partnership
Agreement and the Soda Ash Parent Agreement, there are no outstanding
subscriptions, warrants, calls, options, rights (including unsatisfied
preemptive rights), commitments or agreements to which Soda Ash Partners or its
Affiliates are bound that permit or entitle any Person to purchase or otherwise
receive from or to be issued any partnership interest in Soda Ash Partners or
any security or obligation of any kind convertible into any shares of
partnership capital of Soda Ash Partners, nor is Soda Ash Partners subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its partnership capital.
4.18 SOLVENCY. The Borrower, individually and together with its
Subsidiaries, is Solvent.
4.19 LABOR MATTERS. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge of
the Borrower, threatened that in the aggregate could reasonably be expected to
have a Material Adverse Effect. Hours worked by and payment made to employees of
the Borrower and its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters that in the aggregate could reasonably be expected to have a Material
Adverse Effect. All payments due from the Borrower or any of its Subsidiaries on
account of employee health and welfare insurance that in the aggregate could
reasonably be expected to have a Material Adverse Effect if not paid have been
paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
4.20 ACCURACY OF INFORMATION, ETC. No statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement furnished
to the Administrative Agent or the Lenders or any of them, by or on behalf of
any Loan Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished (or, in the case of the
Confidential Information Memorandum, as of the date of this Agreement), any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. The projections and pro forma financial information contained in the
materials referenced above are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates to
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future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. There is no fact known
to any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates and statements furnished to the Administrative Agent and the
Lenders for use in connection with the transactions contemplated hereby and by
the other Loan Documents.
4.21 SECURITY DOCUMENTS. The Guarantee and Pledge Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the Guarantee and Pledge Agreement, when stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and
in the case of the other Collateral described in the Guarantee and Pledge
Agreement, when financing statements in appropriate form are filed in the
offices specified in the Guarantee and Pledge Agreement, the Guarantee and
Pledge Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Obligations (as defined
in the Guarantee and Pledge Agreement), in each case prior and superior in right
to any other Person.
4.22 YEAR 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Borrower's and its
Subsidiaries' computer systems and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others) and the testing of all such
systems and equipment, as so reprogrammed, are expected by the Borrower to be
completed by April 1, 1999. The cost to the Borrower of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower (including, without limitation, reprogramming errors) will not result
in a Default or a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Borrower and its Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be able to interpret dates after December 31, 1999.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT. The effectiveness of
this Agreement is subject to the satisfaction of the following conditions
precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized officer of the
Borrower, (ii) the Guarantee and Pledge Agreement, executed and delivered by a
duly authorized officer of each Loan Party, and (iii) for the account of each
relevant Lender, Notes
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51
conforming to the requirements hereof and executed by a duly authorized officer
of the Borrower.
(b) RELATED AGREEMENTS. The Administrative Agent shall have received,
with a copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of the Soda Ash Partnership Agreement, the
Management Agreement and such other documents or instruments as may be
reasonably requested by the Administrative Agent, including, without limitation,
a copy of any debt instrument, security agreement or other material contract to
which the Borrower or its Subsidiaries may be a party.
(c) CORPORATE PROCEEDINGS OF EACH LOAN PARTY. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions (or comparable authorizing document), in form and substance
satisfactory to the Administrative Agent, of the Board of Directors (or
comparable governing body) of each Loan Party authorizing (i) the execution,
delivery and performance of the Loan Documents to which it is a party, and (ii)
the granting by it of the Liens created pursuant to the Security Documents,
certified by the Secretary or an Assistant Secretary of such Loan Party as of
the Closing Date, which certificate shall be in form and substance satisfactory
to the Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(d) LOAN PARTY INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, as to the incumbency and signature of the
officers of such Loan Party executing any Loan Document satisfactory in form and
substance to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of such Loan Party.
(e) FEES. The Administrative Agent, the Syndicate Agent, the
Documentation Agent and the Lenders shall have received all fees to be received
from, or reimbursed to them by, the Borrower on the Closing Date.
(f) LEGAL OPINIONS. The Administrative Agent shall have received, with
a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Goodwin, Procter & Hoar LLP,
special counsel to the Borrower and the other Loan Parties,
substantially in the form of Exhibit A-1; and
(ii) the executed legal opinion of Michael R. Herman, General
Counsel of GenChem, substantially in the form of Exhibit A-2.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
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(g) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation, the
filing of duly executed financing statements on form UCC-1, the payment of all
applicable filing and recording fees and expenses and the delivery of stock
certificates, necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Liens created by the Security Documents shall have been
completed.
(h) LIEN SEARCHES. The Administrative Agent shall have received the
results of a recent search by a Person satisfactory to the Administrative Agent
of the Uniform Commercial Code, judgment and tax lien filings which may have
been filed with respect to personal property of the Borrower and its
Subsidiaries, and such search shall reveal no Liens other than Liens permitted
by subsection 7.3 or otherwise satisfactory to the Lenders.
(i) EXISTING CREDIT AGREEMENTS. The Existing Credit Agreements shall be
repaid in full and terminated with the net proceeds of the Term Loans, and all
documents necessary to terminate all liens securing the Existing Credit
Agreements shall have been delivered to the Administrative Agent.
(j) EXISTING SUBORDINATED NOTES. The Administrative Agent shall be
reasonably satisfied that the Existing Subordinated Notes will be redeemed in
full on or prior to August 31, 1998, and the Borrower shall have deposited with
the trustee under the Existing Subordinated Indenture an amount of cash or cash
equivalents equal to the amount required to redeem the Existing Subordinated
Notes in full on or prior to August 31, 1998.
(k) FINANCIAL STATEMENTS. The Lenders shall have received the audited
and unaudited consolidated financial statements of the Borrower referred to in
subsection 4.1.
(l) PRO FORMA BALANCE SHEET. The Lenders shall have received the Pro
Forma Balance Sheet, which shall be satisfactory to the Lenders.
(m) SOLVENCY. The Administrative Agent shall have received a
certificate from the chief financial officer of the Borrower, in form and
substance satisfactory to the Lenders, as to the Solvency of the Borrower after
giving effect to the Refinancing and the other transactions contemplated hereby.
(n) BUSINESS PLAN. The Lenders shall have received a detailed business
plan for each fiscal year from 1998 through and including 2002 and a written
analysis of the business and prospects of the Borrower and its Subsidiaries, all
in form and substance reasonably satisfactory to the Lenders.
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5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender and each Issuing Bank to make any extension of credit requested to be
made by it on any date (including, without limitation, its initial extension of
credit) is subject to the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Borrower and the other Loan Parties in or pursuant
to the Loan Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date (except for changes
permitted by this Agreement).
(b) NO DEFAULT. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by the Borrower hereunder, each issuance of a Letter of Credit
hereunder and the effectiveness of this Agreement under subsection 5.1, shall
constitute a representation and warranty by the Borrower as of the date of such
extension of credit or such initial effectiveness under subsection 5.1, as the
case may be, that the conditions contained in this subsection 5.2 have been
satisfied. No event shall be deemed an extension of credit unless such event
results in an increase in the total principal amount of Loans outstanding or in
the total face amount of Letters of Credit outstanding.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Lender or the Administrative Agent hereunder, the
Borrower shall and (except in the case of delivery of financial information,
reports and notices) shall cause each of its Subsidiaries to (it being agreed
that the Tranche B Term Loan Facility shall only be entitled to the benefits of
subsections 6.1, 6.2(a) and clause (iii) of subsection 6.2(b), 6.4, 6.5, 6.8,
6.9, 6.10 and 6.11 (collectively, the "SHARED AFFIRMATIVE COVENANTS") and shall
not be entitled to the benefits of or any rights under any other provisions of
this Section 6):
6.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and the consolidated balance
sheet of GenChem as at the end of such year and the related
consolidated statements of operations, changes in equity (deficit) and
cash flows for such year, setting forth in each case in compare form
the figures for the previous year, and, in the case of the Borrower,
reported on, without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
Deloitte & Touche LLP or other independent certified public accountants
of nationally recognized standing; and
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(b) as soon as available, but in any event not later than 60
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, the unaudited consolidated balance sheet
of the Borrower and its consolidated Subsidiaries and the unaudited
consolidated balance sheet of GenChem as at the end of such quarter and
the related unaudited consolidated statements of operations, changes in
equity (deficit) and cash flows for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case
in compare form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments) and as having been
prepared in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods (except as approved by
such officer and disclosed therein).
All such financial statements shall present fairly in all material respects the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at the applicable dates, and the consolidated results of their
operations, their changes in equity (deficit) and their consolidated cash flows
for the periods reflected therein, and shall be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such accountants
or officer, as the case may be, and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor such
accountants obtained no knowledge of any Default or Event of Default,
except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and 6.1(b), a Compliance Certificate,
executed by a Responsible Officer, (i) demonstrating compliance with
the covenants contained in subsections 7.1, 7.2(k), 7.2(n), 7.2(p),
7.6, 7.8, 7.9, 7.10(g), 7.10(i) and 7.11(a), (ii) setting forth
calculations of the Cash Flow Coverage Ratio, the Leverage Ratio and
the Senior Leverage Ratio as of the last day of the most recent fiscal
quarter covered by such financial statements and (iii) stating that, to
the best of such Responsible Officer's knowledge, the Borrower during
such period has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement
and in the other Loan Documents to which it is a party to be observed,
performed or satisfied by it, and that such Officer has obtained no
knowledge of any Default or Event of Default except as specified in
such certificate;
(c) within five days after the same are filed, copies of all
financial statements and reports which the Borrower may make to, or
file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority; and promptly, all press releases and
other written statements made available generally by
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the Borrower or any of its Subsidiaries to the public concerning
material developments in the business of the Borrower or any of its
Subsidiaries;
(d) promptly upon receipt thereof, copies of all reports
submitted to the Borrower by its independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of the Borrower or GenChem made by such
accountants, including, without limitation, the comment letter
submitted by such accountants to management in connection with their
annual audit; and the Borrower agrees to obtain such a letter in
connection with each of its annual audits; and
(e) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
diligently conducted and reserves in conformity with GAAP with respect thereto
have been provided on the books of the Borrower or its Subsidiaries, as the case
may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business primarily of the same general types as now conducted by it
and preserve, renew and keep in full force and effect its corporate existence;
and take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business, except as
otherwise permitted pursuant to subsection 7.5, and comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to
maintain such rights, privileges and franchises and to comply with Contractual
Obligations and Requirements of Law could not, in the aggregate, be reasonably
expected to have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all material property
useful and necessary in its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance (to
the extent available at commercially reasonable rates) on all its property in at
least such amounts and against at least such risks as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to each Lender, upon written request, full information as
to the insurance carried.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender upon reasonable prior notice and at reasonable
times to visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and
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other condition of the Borrower and its Subsidiaries with officers and employees
of the Borrower and its Subsidiaries and with its independent certified public
accountants (each Lender will, in accordance with subsection 11.15, maintain the
confidentiality of all information obtained by it pursuant to this subsection
6.6).
6.7 NOTICES. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries which if not cured could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation, investigation or proceeding affecting the
Borrower or any of its Subsidiaries (i) which is reasonably likely to involve a
payment of $10,000,000 or more not covered by insurance, (ii) in which
injunctive or similar relief reasonably likely to have a Material Adverse Effect
is reasonably likely to be obtained or (iii) which if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a Material
Adverse Effect;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, a failure to make any required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution
of proceedings or the taking of any other action by the PBGC or the Borrower or
any Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan;
and
(e) any development or event which could reasonably be expected to
have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, except for such instances of noncompliance that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
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(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws, except for instances in which the obligation to comply or to conduct such
investigations, studies, sampling, testing or remedial actions is being
contested in good faith before a court or administrative body of competent
jurisdiction or in which the failure to so comply or to conduct such activities
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
6.9 FURTHER ASSURANCES. At any time and from time to time, upon
the Administrative Agent's request and at the expense of the Borrower, promptly
and duly execute and deliver or cause to be executed and delivered any and all
further instruments and documents and take such further action as the
Administrative Agent may reasonably request to effect the purpose of the
Security Documents, including, without limitation, the filing of any financing
or continuation statements under the Uniform Commercial Code in effect in any
jurisdiction.
6.10 ADDITIONAL COLLATERAL. (a) With respect to any new Subsidiary (other
than a Foreign Subsidiary) created or acquired after the Closing Date (which,
for the purposes of this paragraph, shall include any existing Subsidiary that
ceases to be a Foreign Subsidiary), by the Borrower or any of its Subsidiaries,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Pledge Agreement as the Administrative Agent deems necessary
or advisable to grant to the Administrative Agent, for the benefit of the
Lenders, a perfected first priority security interest in the Capital Stock of
such new Subsidiary which is owned by the Borrower or any of its Subsidiaries,
(ii) deliver to the Administrative Agent the certificates representing such
Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, (iii) cause such new Subsidiary (A) to become a party to the
Guarantee and Pledge Agreement and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the Lenders a
perfected first priority security interest in the Collateral described in the
Guarantee and Pledge Agreement with respect to such new Subsidiary, including,
without limitation, the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required by the Guarantee and Pledge Agreement
or by law or as may be requested by the Administrative Agent, and (iv) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be
substantially in the forms attached hereto as Exhibits A-1 and A-2.
(b) With respect to any new Foreign Subsidiary created or acquired
after the Closing Date by the Borrower or any of its Subsidiary Guarantors,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Pledge Agreement as the Administrative Agent deems necessary
or advisable in order to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in the Capital Stock
of such new Foreign Subsidiary which is owned by the Borrower or any of its
Subsidiaries (provided that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the
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Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers, in blank, executed and delivered by a duly authorized
officer of the Borrower or such Subsidiary, as the case may be, and take such
other action as may be necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Lien of the Administrative Agent thereon, and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any new Capital Stock created or acquired after the
Closing Date by the Borrower or any of its Subsidiaries in connection with a
transaction described in the last sentence of subsection 7.6, promptly (i)
execute and deliver to the Administrative Agent such amendments to the Guarantee
and Pledge Agreement as the Administrative Agent deems necessary or advisable in
order to grant to the Administrative Agent, for the benefit of the Lenders, a
perfected first priority security interest in such Capital Stock (provided that
in no event shall more than 65% of the total outstanding Capital Stock of any
new Subsidiary be required to be so pledged if such Subsidiary is a Foreign
Subsidiary), (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, and take such other action as may be necessary
or, in the opinion of the Administrative Agent, desirable to perfect the Lien of
the Administrative Agent thereon, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
6.11 EXISTING SUBORDINATED NOTES. Cause the Existing Subordinated Notes
to be redeemed in full on or prior to August 31, 1998 and notify the
Administrative Agent of such redemption promptly following the occurrence
thereof.
SECTION 7. NEGATIVE COVENANTS APPLICABLE TO ALL COMMITMENTS
AND LOANS OTHER THAN TRANCHE B TERM LOAN COMMITMENTS
AND TRANCHE B LOANS
The Borrower hereby agrees that, so long as the Revolving Credit
Commitments and the Tranche A Term Loan Commitments remain in effect, any
Revolving Credit Loans, Tranche A Term Loans, any Letter of Credit or
Reimbursement Obligations remains outstanding and unpaid or any other amount is
owing to any Lender or the Administrative Agent hereunder (other than Tranche B
Term Loans) the Borrower shall not, and (except with respect to subsection 7.1)
shall not permit any of its Subsidiaries to, directly or indirectly; PROVIDED,
HOWEVER, that the Tranche B Term Loan Lenders shall not have the benefits of the
covenants contained in Section 7, and such covenants shall not apply to Tranche
B Term Loans:
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7.1 FINANCIAL CONDITION COVENANTS.
(a) SENIOR LEVERAGE RATIO. Permit the Senior Leverage Ratio as at
the last day of any fiscal quarter of the Borrower to be greater than
3.75 : 1:00.
(b) LEVERAGE RATIO. Permit the Leverage Ratio as at the last day
of any fiscal quarter of the Borrower to be greater than 5.00 : 1.00.
(c) CASH FLOW COVERAGE RATIO. Permit the Cash Flow Coverage Ratio
as at the last day of any fiscal quarter of the Borrower to be less than
2.50 : 1.00.
7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness of GenChem under the Existing Subordinated Notes
prior to August 31, 1998 until redemption in full thereof;
(c) Indebtedness of GC Canada under the GC Canada Working Capital
Facility in an aggregate principal amount not to exceed C$15,000,000;
(d) Indebtedness of GC Canada under the GC Canada Senior Notes in
an aggregate principal amount not to exceed $52,000,000;
(e) Indebtedness of up to C$10,000,000 at any time of Sandco under
the Sandco Credit Facility;
(f) Indebtedness of up to $10,000,000 of Reheis Ireland to fund
Reheis Ireland (the "REHEIS IRELAND CREDIT FACILITY");
(g) Indebtedness of the Borrower to any Subsidiary and of any
wholly owned Subsidiary to the Borrower or any other Subsidiary; PROVIDED
that any such Indebtedness of a wholly owned Subsidiary to the Borrower
shall be evidenced by a non-negotiable senior promissory note having
terms reasonably satisfactory to the Administrative Agent;
(h) Indebtedness of a Person which becomes a Subsidiary after the
date hereof, PROVIDED that (i) such Indebtedness existed at the time such
corporation became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such Person by the Borrower, no Default or Event of Default shall have
occurred and be continuing;
(i) (i) Interest Rate Protection Obligations of the Borrower
entered into to hedge actual interest rate exposure and not for
speculative purposes to the extent that the notional principal amount
thereof does not exceed the amount of Indebtedness
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being hedged, (ii) Interest Rate Protection Obligations of GC Canada
entered into to hedge actual interest rate exposure under the GC Canada
Senior Notes and not for speculative purposes to the extent that the
notional principal amount thereof does not exceed the amount of
Indebtedness being hedged and (iii) Guarantee Obligations by Subsidiaries
of the Borrower in respect of the Borrower's obligations described in the
preceding clause (i) as long as the aggregate amount of such Guarantee
Obligations (as measured by the relevant swap termination values) does
not exceed $5,000,000;
(j) Indebtedness under Currency Agreements; PROVIDED that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Borrower outstanding
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;
(k) Indebtedness of the Borrower or any of its Subsidiaries (other
than such Indebtedness permitted by subsection 7.2(p)) incurred to
finance the acquisition of fixed or capital assets (whether pursuant to a
loan, a Financing Lease or otherwise) in an aggregate principal amount
not exceeding as to the Borrower and its Subsidiaries $30,000,000 at any
time outstanding;
(l) Indebtedness of the Borrower or any of its Subsidiaries at any
time outstanding incurred in the ordinary course of business in respect
of reclamation bonds, performance bonds, letters of credit and surety
bonds provided by the Borrower or any of its Subsidiaries required by and
in compliance with the applicable statutes or laws of the relevant
jurisdiction;
(m) Indebtedness outstanding on the date hereof and listed on
Schedule III;
(n) Indebtedness of the Borrower or any of its Subsidiaries in an
aggregate principal amount not to exceed $20,000,000 at any time
outstanding;
(o) any Indebtedness ("REFINANCING INDEBTEDNESS") incurred in
connection with the extension, renewal, substitution, refinancing or
replacement (collectively, a "REFINANCING TRANSACTION") of any
Indebtedness referred to in clauses (c) through (m) above and clause (p)
below; PROVIDED that (i) such Refinancing Transaction does not result in
an increase in the aggregate principal amount of the Indebtedness being
extended, renewed, substituted, refinanced or replaced, or an increase in
amortization payments payable by the Borrower or its Subsidiaries at any
time prior to June 30, 2006, (ii) such Refinancing Indebtedness contains
terms which, taken as a whole, are substantially similar to the terms of
the Indebtedness being extended, renewed, substituted, refinanced or
replaced and (iii) the only obligors on the applicable Refinancing
Indebtedness are the obligors on the Indebtedness being refinanced unless
otherwise permitted by subsections 7.2 and 7.4; and
(p) other Indebtedness of Subsidiaries of the Borrower as long as,
at the time of the incurrence of such Indebtedness, the Borrower delivers
to the Administrative
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Agent a certificate from its chief financial officer demonstrating that
it would be in compliance with subsection 7.1 for the most recent period
for which a Compliance Certificate has been delivered pursuant to
subsection 6.2(b) after giving effect to the incurrence of such
Indebtedness (and the application of the proceeds thereof including the
effects of acquired businesses and assets) and recalculating the Senior
Leverage Ratio as if such Indebtedness had been incurred on the first day
of such period and remained outstanding during such period.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted, PROVIDED that
adequate reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with
GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which secure amounts not overdue for a period of more than 60
days or which are being contested in good faith by appropriate
proceedings diligently conducted or which do not exceed $1,000,000 in the
aggregate at any time;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which exist on
the date hereof or which, in the aggregate, are not substantial in amount
and which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule III,
PROVIDED that no such Lien is spread to cover any additional property
after the Closing Date and that the amount of Indebtedness secured
thereby is not increased;
(g) Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 7.2(k) incurred in the ordinary
course of business to finance the acquisition of fixed or capital assets,
PROVIDED that (i) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or capital assets, (ii)
such Liens do not at any time encumber any property other than the
property financed
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by such Indebtedness, (iii) the amount of Indebtedness secured thereby is
not increased and (iv) the principal amount of Indebtedness secured by
any such Lien shall at no time exceed 80% of the fair value (as
determined in good faith by the Borrower and evidenced by a certificate
of a Responsible Officer) of such property at the time it was acquired;
(h) Liens on the property or assets of a corporation which becomes
a Subsidiary after the date hereof securing Indebtedness permitted by
subsection 7.2(h), PROVIDED that (i) such Liens existed at the time such
corporation became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any property or assets
of such corporation after the time such corporation becomes a Subsidiary
(except after-acquired property to the extent such Lien includes after-
acquired property) and (iii) the amount of Indebtedness secured thereby
is not increased;
(i) (i) Liens on the assets of GC Canada and its Subsidiaries
which secure obligations of GC Canada under the GC Canada Working Capital
Facility, (ii) Liens on the assets of Sandco and its Subsidiaries which
secure obligations of Sandco under the Sandco Credit Facility and (iii)
Liens on the assets of Reheis Ireland and its Subsidiaries which secure
obligations of Reheis Ireland under the Reheis Ireland Credit Facility;
(j) Liens created pursuant to the Security Documents;
(k) Liens securing Refinancing Indebtedness permitted by
subsection 7.2(o) PROVIDED that (i) such Liens cover only the property
securing the Indebtedness being refinanced and (ii) the principal amount
of Indebtedness secured thereby is not increased; and
(l) other Liens (other than on property constituting Collateral)
securing up to $15,000,000 of obligations.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation, unless such obligation would be
permitted to be incurred as Indebtedness of such Person pursuant to subsection
7.2.
7.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (PROVIDED that the Borrower shall be the
continuing or surviving corporation) or with or into any one or more
wholly owned Domestic Subsidiaries of the Borrower (PROVIDED that the
wholly owned Domestic Subsidiary or Subsidiaries shall be the continuing
or surviving corporation);
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(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Borrower or any other wholly owned Subsidiary of the
Borrower; and
(c) in order to consummate an acquisition permitted by subsection
7.10(g), the Borrower or a Subsidiary may be merged with the acquired
company as long as the surviving company is (i) the Borrower (if the
Borrower consummates any such transaction) or (ii) otherwise, a
Subsidiary of the Borrower.
7.6 LIMITATION ON SALE OF ASSETS. Consummate an Asset Sale unless
(i) the Borrower (or applicable Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Borrower and evidenced by a
certificate of a Responsible Officer) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Borrower or such Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Borrower's or
such Subsidiary's most recent balance sheet) of the Borrower or any Subsidiary
(other than contingent liabilities and liabilities that are by their terms
subordinated to the Obligations or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Borrower or such Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Borrower or any such
Subsidiary from such transferee that are converted by the Borrower or such
Subsidiary into cash (to the extent of the cash received) within 90 days
following such receipt, shall be deemed to be cash for purposes of this
provision. Notwithstanding the preceding clause (ii), the Borrower and its
Subsidiaries may consummate one or more Asset Sales by making contributions of
assets to joint ventures in exchange for consideration consisting of Capital
Stock of such joint ventures engaged in businesses described in subsection 7.16
as long as (a) such Capital Stock is pledged to the Lenders in accordance with
subsection 6.10(c) and (b) such contributions are permitted by subsection 7.10.
7.7 RESERVED.
7.8 LIMITATION ON RESTRICTED PAYMENTS. (a)(i) Declare or pay any
dividend or make any distribution on, or purchase, redeem or otherwise acquire
or retire for value, or make or permit any of its Subsidiaries to declare or pay
any dividend or make any distribution on or payment on account of the purchase,
redemption, defeasance or other acquisition or retirement for value of, any
Capital Stock of the Borrower or of any Affiliate of the Borrower (other than a
wholly owned Subsidiary of the Borrower), other than through the issuance solely
of the Borrower's own Capital Stock (other than Redeemable Stock), or (ii) make
any principal payment on, or redeem, repurchase or defease, or otherwise acquire
or retire for value, or permit any of its Subsidiaries to, directly or
indirectly, make any principal payment on, or redeem, repurchase or defease, or
otherwise acquire or retire for value, prior to any scheduled principal payment,
scheduled sinking fund payment or scheduled maturity, any Indebtedness or
Guarantee Obligations which are subordinated to the Obligations (or, if
applicable, any guarantee thereof) (other than as permitted by subsection 7.11),
(iii) make, or permit any of its Subsidiaries to make, any Restricted Investment
or (iv) make or commit to
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make Capital Expenditures in excess of those permitted by clause (a) of
subsection 7.9 (such payments or any other actions described in clauses (i),
(ii), (iii) and (iv) are collectively referred to as "RESTRICTED PAYMENTS")
unless at the time of and after giving effect to the proposed Restricted
Payment, (A) no Default or Event of Default (including, without limitation, any
Default or Event of Default under subsection 7.1(c)) shall have occurred and be
continuing; and (B) the aggregate amount of all Restricted Payments made after
the date of this Agreement shall not exceed the sum of (1) (a) the aggregate Net
Cash Proceeds received by the Borrower from the issuance or sale (other than to
a Subsidiary or an ESOP) after April 1, 1998 of shares of its Capital Stock
(excluding Redeemable Stock) plus (b) the aggregate Net Cash Proceeds received
by the Borrower from the issuance or sale (other than to a Subsidiary or an
ESOP) after the Closing Date of shares of its Capital Stock, plus (2) the
aggregate net proceeds received by the Borrower from the issuance or sale (other
than to a Subsidiary or an ESOP) after April 1, 1998 of any debt securities or
Redeemable Stock that have been converted into or exchanged for Capital Stock
(excluding Redeemable Stock) of the Borrower, plus (3) Qualifying ESOP
Purchases, plus (4) the lesser of (X) 50% of the Consolidated Adjusted Net
Income (or, in the case of a deficit Consolidated Adjusted Net Income, minus
100% of such deficit) of the Borrower accrued on a cumulative basis for the
period commencing on April 1, 1998 to the last day of the fiscal quarter
immediately preceding the date of the proposed Restricted Payment and (Y) 50% of
the Consolidated Cash Flow (or, in the case of a deficit Consolidated Cash Flow,
minus 100% of such deficit Consolidated Cash Flow) of the Borrower accrued on a
cumulative basis for the period commencing on April 1, 1998 to the last day of
the fiscal quarter immediately preceding the date of the proposed Restricted
Payment plus (5) $50,000,000.
For purposes of this subsection 7.8, the "net proceeds" from the
issuance of shares of Capital Stock of the Borrower issued upon conversion or
exchange of debt securities or Redeemable Stock shall be deemed to be the net
book value of such debt securities or Redeemable Stock at the date of conversion
(plus the additional amount required to be paid upon such conversion, if any)
less any cash payment made by the Borrower on account of fractional shares. For
purposes of this paragraph, the "net book value" of a security shall be the
amount received by the Borrower on the issuance of such security, as adjusted in
accordance with GAAP on the books of the Borrower to the date of conversion or
exchange. The foregoing shall not be interpreted to limit the authority of the
Board of Directors of the Borrower, as set forth above, to determine the value
of other securities of the Borrower or other property received as net proceeds.
(b) Notwithstanding anything in subsection 7.8(a) to the contrary,
the following shall not be included in the calculation of the aggregate amount
of Restricted Payments made after the date of this Agreement: (1) the
redemption, repurchase or other acquisition or retirement of any shares of any
class of Capital Stock of the Borrower or of any Subsidiary of the Borrower in
exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu of
the issuance of fractional shares or scrip), or out of the proceeds of a
substantially concurrent issue and sale (other than to a Subsidiary or an ESOP)
of, other shares of Capital Stock (other than Redeemable Stock) of the Borrower;
(2) to the extent otherwise permitted pursuant to this Agreement, the purchase
or redemption of subordinated Indebtedness made in exchange
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for, or out of the proceeds of a substantially concurrent issue and sale (other
than to a Subsidiary or an ESOP) of, other subordinated Indebtedness which
(A) is subordinated to the Loans and all other obligations of the Borrower
hereunder to at least the same extent as the subordinated Indebtedness being
purchased or redeemed and (B) does not require any increase in amortization
payments payable by the Borrower at any time prior to June 30, 2006;
(3) payments by Soda Ash Partners to the general partners of Soda Ash Partners
under the terms of the Soda Ash Partnership Agreement; (4) payments by the
Borrower pursuant to and in accordance with the Management Agreement; PROVIDED,
HOWEVER, that no such payments by the Borrower may be made pursuant to and in
accordance with the Management Agreement if a Default or Event of Default shall
have occurred and be continuing; (5) payments by the Borrower pursuant to its
equity incentive plans to the extent such payments are reflected as expenses in
the calculation of Consolidated Net Income; (6) the payment of any dividend by a
Subsidiary of the Borrower to the holders of its common Equity Interests on a
pro rata basis; (7) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Borrower or any Subsidiary
of the Borrower held by any member of the Borrower's (or any of its
Subsidiaries') management, consultants or advisors pursuant to any management
equity subscription agreement or stock option agreement in effect as of the
Closing Date; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $1,000,000 in
any twelve-month period and no Default or Event of Default shall have occurred
and be continuing immediately after such transaction; and (8) payments of any
amounts to an ESOP or other stock plan for employees in an amount not to exceed
$1,000,000. Solely for purposes of any calculation that is required to be made
pursuant to this covenant within 60 days after the declaration of a dividend or
other distribution in respect of Capital Stock by the Borrower or any of its
Subsidiaries, such dividend or other distribution in respect of Capital Stock
shall be deemed to be paid at the date of declaration, and the subsequent
payment of such dividend or other distribution in respect of Capital Stock
during such 60-day period shall not be treated as an additional Restricted
Payment; PROVIDED that no such dividend may be paid or distribution made if a
Default or an Event of Default has occurred and is continuing or would result
therefrom.
7.9 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) ("CAPITAL
EXPENDITURES") except for expenditures in the ordinary course of business not
exceeding, in the aggregate for the Borrower and its Subsidiaries (a)
$80,000,000 during any fiscal year of the Borrower (plus, beginning with the
1999 fiscal year, the excess, if any, of $80,000,000 over the amount of Capital
Expenditures made in the preceding fiscal year) plus (b) in any fiscal year of
the Borrower the amount of additional Capital Expenditures which the Borrower
and its Subsidiaries are permitted to make and commit to make pursuant to
subsection 7.8.
7.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes,
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debentures or other securities of or any assets constituting a business unit of,
or make any other investment in, any Person (each of the foregoing an
"INVESTMENT"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash and Cash Equivalents;
(c) loans and advances to employees of the Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(d) (i) Investments of the Borrower and its Subsidiaries in
Subsidiaries of the Borrower as such investments are in effect on the
date hereof and (ii) loans and advances by Subsidiaries of the Borrower
to the Borrower;
(e) additional Investments by the Borrower or by its Subsidiaries
in wholly owned existing Subsidiaries of the Borrower;
(f) Investments in the Capital Stock or the assets of Soda Ash
Partners; PROVIDED that at the time of the making of such Investment no
Default or Event of Default shall have occurred and be continuing or
shall result therefrom;
(g) Investments consisting of the acquisition of all or
substantially all of the assets of, or Capital Stock of, a Person or
division or line of business of a Person if immediately after giving
effect thereto (i) no Default or Event of Default shall have occurred and
be continuing or would result therefrom, (ii) the Borrower shall be in
compliance, on a PRO FORMA basis after giving effect to such acquisition,
with the covenants contained in subsection 7.1 recomputed as at the last
day of the most recently ended fiscal quarter of the Borrower as if such
acquisition had occurred on the first day of each relevant period for
testing such compliance, and the Borrower shall have delivered to the
Administrative Agent, a certificate of its chief financial officer to
such effect accompanied by all relevant financial information for such
acquisition and (iii) if such acquisition is of assets other than Capital
Stock, the acquiring Person shall be a Grantor under the Guarantee and
Pledge Agreement; provided that no acquisition may be made of the Capital
Stock of any public company unless the Board of Directors (or other
governing body) of such company approves such acquisition at the time it
is commenced;
(h) Capital Expenditures made pursuant to and in accordance with
subsection 7.9;
(i) additional Investments not to exceed $50,000,000 in the
aggregate if immediately after giving effect thereto (i) no Default or
Event of Default shall have occurred and be continuing or would result
therefrom, and (ii) the Borrower shall be in compliance on a PRO FORMA
basis after giving effect to such Investment, with the covenants
contained in subsection 7.1 recomputed as at the last day of the most
recently ended fiscal quarter of the Borrower as if such Investment had
occurred on
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the first day of each relevant period for testing such compliance, and
the Borrower shall have delivered to the Administrative Agent, a
certificate of its chief financial officer to such effect accompanied by
all relevant financial information for such acquisition; provided that no
acquisition may be made of the Capital Stock of any public company unless
the Board of Directors (or other governing body) of such company approves
such acquisition at the time it is commenced; and
(j) Restricted Investments made in accordance with subsection 7.8.
7.11 LIMITATIONS ON OPTIONAL PAYMENTS AND MODIFICATIONS OF AGREEMENTS.
Subject to subsection 7.17 (a) make any optional payment or prepayment on or
redemption, defeasance or purchase of any Indebtedness (other than, as part of
the Refinancing, the Existing Subordinated Indenture) or Guarantee Obligations,
in each case, which are subordinated to the Obligations (or, if applicable, any
guarantee thereof), except, so long as no Default or Event of Default has
occurred and is continuing or would result therefrom (i) in connection with the
extension, renewal, substitution, refinancing or replacement of any such
Indebtedness with Refinancing Indebtedness (as defined in and to the extent
permitted by subsection 7.2(o)) and (ii) as permitted by subsection 7.8, (b)
amend, modify or change, or consent or agree to any amendment, modification or
change to, any of the terms of any Indebtedness which is subordinated to any of
the Obligations (or any guarantee thereof) in any material respect or in any way
that is materially adverse to the interests of the Lenders or the Borrower, (c)
amend, modify or change, or consent to any amendment, modification or change to
(i) any of the terms of the Soda Ash Partnership Agreement that is materially
adverse to the interests of the Lenders or the Borrower or the Management
Agreement in any material respect or in any way that is in the aggregate
materially adverse to the interests of the Lenders or the Borrower or (ii) any
of the terms of the Security Documents. The Borrower shall provide the
Administrative Agent and each Lender with prior written notice of (i) any
payment, prepayment, redemption, defeasance or purchase of any Indebtedness or
Guarantee Obligation pursuant to clause (a) above and (ii) any amendment,
modification or change to any of the terms of any Indebtedness of the Borrower
and its Subsidiaries or of any agreement referred to in clause (c) above.
7.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms in the aggregate no less favorable to the Borrower or
such Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate; provided that the
Borrower may enter into the Management Agreement and renewals, modifications,
replacements or amendments of such agreement permitted by subsection 7.11.
7.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such
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Person on the security of such property or rental obligations of the Borrower or
such Subsidiary.
7.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year
of the Borrower to end on a day other than December 31, unless this Agreement
shall have been amended as necessary to restore the parties hereto as nearly as
possible to their respective positions prior to such change in fiscal year.
7.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than (a) this Agreement and (b) any industrial
revenue bonds, purchase money mortgages or Financing Leases permitted by this
Agreement (in which cases, any prohibition or limitation shall only be effective
against the assets financed thereby), which prohibits or limits the ability of
the Borrower or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired.
7.16 LIMITATION ON LINES OF BUSINESS. Enter into any significant
business, either directly or through any Subsidiary, except for those businesses
which are primarily of the same general types as those in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement or which are related
or complementary thereto.
7.17 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF TRANCHE
B TERM LOANS. (a) Make any optional payment or prepayment of the Tranche B Term
Loans (other than scheduled payments of principal and interest or as part of an
optional prepayment of the Term Loans pursuant to the provisions of this
Agreement) or (b) consent to any amendment, modification or change to this
Agreement or any other Loan Document to the extent relating to the Tranche B
Term Loan Facility which adversely affects the Revolving Credit Lender or the
Tranche A Term Loan Lender.
SECTION 8. COVENANTS APPLICABLE TO TRANCHE B TERM LOAN
COMMITMENTS AND TRANCHE B TERM LOANS
The Borrower hereby agrees that, until payment in full of all
Tranche B Loans and any other amount then due and owing on account of the
Tranche B Loans to any Tranche B Lender or the Administrative Agent hereunder or
under any Tranche B Term Note:
(a) The covenants contained in Annex B (the "COVENANTS") (together
with the definitions of such terms as may be used therein) are hereby
deemed to be incorporated herein by reference.
(b) The Borrower shall, and shall cause its Restricted
Subsidiaries (as defined in Annex B) to, observe and perform the
Covenants, as such Covenants may be amended, supplemented or otherwise
modified from time to time with the consent of the Required Tranche B
Term Loan Lenders.
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SECTION 9. EVENTS OF DEFAULT
9.1 CERTAIN BANKRUPTCY EVENTS. If any of the following events
shall occur and be continuing:
(a) (i) The Borrower or any of its Domestic Subsidiaries or
Material Foreign Subsidiaries shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of
its assets, or the Borrower or any of its Domestic Subsidiaries or
Material Foreign Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the
Borrower or any of its Domestic Subsidiaries or Material Foreign
Subsidiaries any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Domestic Subsidiaries or
Material Foreign Subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Borrower or any of its Domestic
Subsidiaries or Material Foreign Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any of its Domestic Subsidiaries or
Material Foreign Subsidiaries shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they become
due;
then, and in any such event:
(A) if such event is an Event of Default specified in clause (i) or (ii)
of paragraph (a) of this subsection 9.1 with respect to the Borrower,
automatically the Revolving Credit Commitments shall immediately terminate and
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable; and
(B) if such event is any other Event of Default specified in this
subsection 9.1, any or all of the following actions may be taken: (i) with the
consent of the Required Basic Lenders, the Administrative Agent may, or upon the
request of the Required Basic Lenders, the Administrative Agent shall, by notice
to the Borrower declare the Revolving Credit
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Commitments and/or the Tranche A Term Loan Commitments to be terminated
forthwith, whereupon the Revolving Credit Commitments and/or the Tranche A Term
Loan Commitments (as the case may be) shall immediately terminate; (ii) with the
consent of the Required Basic Lenders, the Administrative Agent may, or upon the
request of the Required Basic Lenders, the Administrative Agent shall, by notice
to the Borrower, declare the Revolving Credit Loans and/or the Tranche A Loans
hereunder (with accrued interest thereon) and all other amounts owing on account
thereof under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) to be due and
payable forthwith, whereupon the same shall immediately become due and payable;
(iii) with the consent of the Required Tranche B Term Loan Lenders, the
Administrative Agent may, or upon the request of the Required Tranche B Term
Loan Lenders, the Administrative Agent shall, by notice to the Borrower declare
the Tranche B Term Loan Commitments to be terminated forthwith, whereupon the
Tranche B Term Loan Commitments shall immediately terminate; and (iv) with the
consent of the Required Tranche B Term Loan Lenders, the Administrative Agent
may, or upon the request of the Required Tranche B Term Loan Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Tranche B
Loans (with accrued interest thereon) and all other amounts owing on account
thereof under this Agreement to be due and payable forthwith, whereupon the same
shall immediately become due and payable.
9.2 OTHER EVENTS OF DEFAULT APPLICABLE TO THE TRANCHE A
COMMITMENTS, REVOLVING CREDIT COMMITMENTS AND AMOUNTS OWING THEREUNDER. If any
of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Revolving
Credit Loan or Tranche A Term Loan, or any Reimbursement Obligation when
due in accordance with the terms thereof; or the Borrower shall fail to
pay any interest on any Revolving Credit Loan or Tranche A Term Loan, or
any other amount payable on account thereof hereunder (other than the
Tranche B Term Loans and interest thereon), within three Business Days
after any such interest or other amount becomes due in accordance with
the terms thereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been
incorrect or misleading in any material respect on or as of the date made
or deemed made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in subsection 6.11
or Section 7 or 8 hereof; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan
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Document (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of 30
days after written notice to the Borrower by the Administrative Agent; or
(e) The Borrower or any of its Subsidiaries shall (i) default in
any payment of principal of or interest on any Indebtedness (other than
the Revolving Credit Loans, the Tranche A Term Loans and the
Reimbursement Obligations) or in the payment of any Guarantee Obligation,
aggregating $10,000,000 or more, beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement under
which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition following any applicable grace periods relating to any
Indebtedness or Guarantee Obligation referred to in clause (i)
immediately above or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of any Indebtedness referred to
in clause (i) immediately above or beneficiary or beneficiaries of such
Guarantee Obligation referred to in clause (i) immediately above (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice, lapse of time or both
if required, such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable, PROVIDED, HOWEVER, that
if the default described in this clause (ii) is cured, the Event of
Default under this clause (ii) shall be simultaneously cured; or
(f) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived, shall exist with respect
to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the
assets of the Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in
the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other similar event
or condition shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or condition, together
with all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect; or
(g) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a
liability (to the extent not paid or covered by insurance less any
applicable and customary retention or deductible) of
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$10,000,000 or more, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 60 days
from the entry thereof; or
(h) (i) Any of the Security Documents shall cease, for any reason,
to be in full force and effect (other than pursuant to the terms hereof
or thereof), or the Borrower or any other Loan Party which is a party to
any of the Security Documents shall so assert or (ii) the Lien created by
any of the Security Documents shall cease to be enforceable and of the
same effect and priority purported to be created thereby;
(i) any guarantee under the Guarantee and Pledge Agreement shall
cease for any reason to be in full force and effect (other than pursuant
to the terms hereof or thereof) or any Loan Party shall so assert in
writing; or
(j) a Change in Control shall have occurred; or
(k) the Borrower shall cease to beneficially own 100% of each
class of Capital Stock of GenChem, free of Liens (except for Liens
created pursuant to the Security Documents);
then, and in any such event, either or both of the following actions may be
taken: (i) with the consent of the Required Basic Lenders, the Administrative
Agent may, or upon the request of the Required Basic Lenders, the Administrative
Agent shall, by notice to the Borrower, declare the Revolving Credit Commitments
and/or the Tranche A Term Loan Commitments to be terminated forthwith, whereupon
the Revolving Credit Commitments and/or the Tranche A Term Loan Commitments
shall immediately terminate; and (ii) with the consent of the Required Basic
Lenders, the Administrative Agent may, or upon the request of the Required Basic
Lenders, the Administrative Agent shall, by notice to the Borrower, declare the
Loans (other than the Tranche B Term Loans) hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
then outstanding Letters of Credit shall have presented the documents required
thereunder) and the Notes (other than the Tranche B Term Loans and accrued
interest thereon) to be due and payable forthwith, whereupon the same shall
immediately become due and payable.
9.3 CERTAIN EVENTS OF DEFAULT APPLICABLE TO TRANCHE B TERM LOAN
COMMITMENTS AND AMOUNTS OWING THEREUNDER. If any of the following events shall
occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Tranche B
Term Loan when due in accordance with the terms hereof; or the Borrower
shall fail to pay any interest on any Tranche B Term Loan, or any other
amount payable on account thereof hereunder, within three Business Days
after any such interest or other amount becomes due in accordance with
the terms hereof; or
(b) Any representation or warranty made or deemed made on or prior
to the Closing Date by the Borrower or any other Loan Party herein or in
any other Loan
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Document or which is contained in any certificate, document or financial
or other statement furnished by it on or prior to the Closing Date under
or in connection with this Agreement or any such other Loan Document
shall prove to have been incorrect in any material respect on or as of
the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of
any agreement contained in subsection 6.1, subsection 6.2(a), clause
(iii) of subsection 6.2(b), subsection 6.4, 6.5, 6.8, 6.9 or 6.10, and
such default shall continue unremedied for a period of 60 days after
written notice to the Borrower by the Administrative Agent; or
(d) The Borrower or any other Loan Party shall default in the
observance of performance of any agreement contained in subsection 6.11,
8.1, 8.2 or 8.3 (as incorporated by Section 8);
(e) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 8 (other
than as set forth in paragraph (d) above) and such default shall continue
unremedied for 60 days after written notice to the Borrower by the
Administrative Agent; or
(f) The Borrower or any of its Subsidiaries shall (i) default in
any payment of principal of or interest on any Indebtedness (other than
the Tranche B Term Loans) or in the payment of any Guarantee Obligation
(other than in respect of the Tranche B Term Loans), aggregating
$10,000,000 or more, beyond the period of grace (not to exceed 30 days),
if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition following
any applicable grace period relating to any Indebtedness or Guarantee
Obligation referred to in clause (i) above or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice or
lapse of time if required, such Indebtedness to become due and payable
prior to its stated maturity or such Guarantee Obligation to become
payable, PROVIDED, HOWEVER, that if the default described in this clause
(ii) is cured, the Event of Default under this clause (ii) shall be
simultaneously cured; PROVIDED, HOWEVER, that no Default or Event of
Default shall exist under this paragraph unless in the case of clause
(ii) above only, (x) such default or other event or condition shall have
continued for a period of 60 days or (y) the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or administrative agent on behalf of such holder or holders
or beneficiary or beneficiaries) shall have caused such Indebtedness to
become due prior to its stated maturity or such Guarantee Obligation to
become payable; or
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(g) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a
liability (to the extent not paid or covered by insurance less any
applicable and customary retention or deductible) of $10,000,000 or more
and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(h) (i) Any of the Security Documents shall cease for any reason
to be in full force and effect (other than pursuant to the terms hereof
or thereof), or the Borrower or any other Loan Party which is a party to
any of the Security Documents shall so assert, or (ii) the Lien created
by any of the Security Documents shall cease to be enforceable and of the
same effect as to perfection and priority purported to be created
thereby, and such failure of such Lien to be perfected and enforceable
with such priority shall have continued unremedied for a period of
perfection and 20 days; or
(i) Any guarantee under the Guarantee and Pledge Agreement shall
cease for any reason to be in full force and effect (other than pursuant
to the terms hereof or thereof) or any Loan Party shall so assert in
writing;
then, and in any such event, either or both of the following actions may be
taken: (i) with the consent of the Required Tranche B Term Loan Lenders, the
Administrative Agent may, or upon the request of the Required Tranche B Term
Loan Lenders, the Administrative Agent shall, by notice to the Borrower, declare
the Tranche B Term Loan Commitments to be terminated forthwith, whereupon the
Tranche B Term Loan Commitments shall immediately terminate; and (ii) with the
consent of the Required Tranche B Term Loan Lenders, the Administrative Agent
may, or upon the request of the Required Tranche B Term Loan Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Tranche B
Term Loans to be due and payable forthwith, whereupon the same shall immediately
become due and payable.
9.4 CERTAIN PROVISIONS APPLICABLE TO LETTERS OF CREDIT. With
respect to all Letters of Credit with respect to which presentment for honor
shall not have occurred at the time of an acceleration pursuant to subsection
9.1 or subsection 9.2, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Banks and the Participating Banks, a security interest in such cash
collateral to secure all obligations of the Borrower in respect of such Letters
of Credit under this Agreement and the other Loan Documents. Amounts held in
such cash collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the Notes. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
Notes shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower. The Borrower shall execute and
deliver to the Administrative Agent, for the account of the Issuing Banks and
the Participating Banks,
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such further documents and instruments as the Administrative Agent may request
to evidence the creation and perfection of such security interest in such cash
collateral account.
9.5 CERTAIN WAIVERS. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENT.
10.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints Chase as the Administrative Agent of such Lender under this Agreement
and the other Loan Documents, and each such Lender irrevocably authorizes Chase,
as the Administrative Agent for such Lender, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein and in the other Loan Documents, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. The Designated Issuer in its capacity as such shall be
entitled to the same rights under this Section 10 as accrue to the
Administrative Agent as if it were named in place of the Administrative Agent,
provided that the Term Loan Lenders shall not be required to indemnify the
Designated Issuer in connection with any Letter of Credit issued by it.
10.2 DELEGATION OF DUTIES. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any
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of the agreements contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect the properties, books or records of the Borrower.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Basic Lenders, the Required
Tranche B Lenders or the Required Lenders as it deems appropriate or it shall
first be indemnified to its satisfaction by the Basic Lenders, the Tranche B
Term Loan Lenders or the Required Lenders as it deems appropriate against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the Notes and the other Loan Documents if acting in accordance with a
request of the Basic Lenders, the Tranche B Term Loan Lenders or the Required
Lenders as it deems appropriate, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default,
or any Acceleration of any amounts due hereunder, as shall be reasonably
directed by the Required Basic Lenders, the Required Tranche B Term Loan Lenders
or the Required Lenders (depending upon whether such Default, Event of Default
or Acceleration relates to Basic Lenders, the Tranche B Term Loan Lenders or
both); PROVIDED that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default, Event of Default or Acceleration as it shall deem advisable in
the best interests of the relevant Lenders. To the extent that, as a result of
the exercise by it of any remedies with respect to any Collateral, the
Administrative Agent shall receive or realize any amounts, it shall distribute
such amounts ratably among the Lenders by reference to the aggregate amounts
accrued and unpaid that are outstanding under the Agreement and the other Loan
Documents and owing to the respective Lenders (after deducting and applying any
amounts then owing to the Administrative Agent or on account of expenses of the
Administrative Agent previously paid by any Lender), and if the portion to be so
distributed to any Lenders
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shall exceed the sum then due and payable to such Lenders, such excess shall be
held by the Administrative Agent in a collateral account for such Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of any
Loan Party, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower. Each Lender acknowledges and agrees to
comply with the provisions of subsection 11.6 applicable to such Lender. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by the Administrative Agent hereunder, the Administrative Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower which
may come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower and the other
Loan Parties to do so), ratably according to their respective Total Credit
Percentages in effect on the date on which indemnification is sought under this
subsection (or, if indemnification is sought after the date upon which the
Revolving Credit Commitments shall have terminated and the Loans shall have been
paid in full, ratably in accordance with their Total Credit Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The obligations to indemnify the Issuing
Lender shall be ratable
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among the Revolving Credit Lenders in accordance with their respective Revolving
Credit Commitments (or, if the Revolving Credit Commitments have been
terminated, the outstanding principal amount of their respective Revolving
Credit Loans and L/C Obligations and their respective participating interests in
the outstanding Letters of Credit). The agreements in this subsection shall
survive the payment of the Loans and all other amounts payable hereunder.
10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower and the other
Loan Parties as though the Administrative Agent were not the Administrative
Agent hereunder and under the other Loan Documents. With respect to its Loans
made or renewed by it and any Note issued to it and with respect to any Letter
of Credit issued or participated in by it, the Administrative Agent shall have
the same rights and powers under this Agreement and the other Loan Documents as
any Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower (such approval not to be unreasonable withheld),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loan. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this subsection shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
10.10 DOCUMENTATION AGENT AND SYNDICATION AGENT. Neither the
Documentation Agent nor the Syndication Agent shall have any rights or
obligations under the Loan Documents in their capacities as such.
SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement or any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Borrower
and the other Loan Parties written amendments, supplements or modifications
hereto and to the other Loan Documents for the purpose of adding any provisions
to this Agreement or the other Loan Documents or changing in any
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manner the rights of the Lenders or of the Borrower and the other Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as the
Required Lenders or the Administrative Agent, as the case may be, may specify in
such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall:
(i)(x) reduce the amount or extend the scheduled date of maturity
of any Revolving Credit Loan or any Reimbursement Obligation or of any
scheduled installment thereof, or (y) reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any
payment thereof or increase the amount or (z) extend the expiration date
of any Lender's Revolving Credit Commitment, in each case, without the
written consent of each Lender directly affected thereby,
(ii) amend, modify or waive any provision of subsection 10.5 or
this subsection 11.1 or reduce the percentage specified in the definition
of Required Lenders or of Required Release Lenders, or consent to the
assignment or transfer by any Loan Party of any of its rights and
obligations under this Agreement and the other Loan Documents (other than
pursuant to subsection 7.5), in each case, without the written consent of
all the Lenders,
(iii) (a) release any significant Loan Party from its obligations
under the Guarantee and Pledge Agreement or release all or substantially
all of the Collateral, in either case without the consent of each Lender;
or (b) release any other Loan Party from its obligations under the
Guarantee and Pledge Agreement or release less than substantially all of
the Collateral without the written consent of the Required Release
Lenders; in each case in clauses (a) and (b) except as expressly
permitted hereby or by the Guarantee and Pledge Agreement,
(iv) amend, modify or waive any provision of (x) subsection 2.3
(to the extent such subsection 2.3 relates to the Tranche A Term Loans)
or 2.5(a) without the written consent of Tranche A Term Loan Lenders, the
Tranche A Term Loan Percentages of which aggregate more than 50% (unless
such amendment, modification or waiver extends the scheduled final
maturity of the Tranche A Term Loans, in which case the written consent
of each Tranche A Term Loan Lender is required), or (y) subsection 2.3
(to the extent such subsection 2.3 relates to the Tranche B Term Loans)
or 2.5(b) without the written consent of the Required Tranche B Term Loan
Lenders (unless such amendment, modification or waiver extends the
scheduled final maturity of the Tranche B Term Loans, in which case the
written consent of each Tranche B Term Loan Lender is required),
(v) amend, modify or waive any provision of subsection 2.1, 2.2,
2.8, 2.9(g) or 2.9(h) without the written consent of the Revolving Credit
Lenders, the Revolving Credit Commitment Percentages of which aggregate
more than 50%,
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(vi) amend, modify or waive any provision of Section 10 without
the written consent of the then Administrative Agent and, if affected
thereby, the Designated Issuer,
(vii) amend, modify or waive any prepayment required by subsection
2.9(c), 2.9(d) or 2.9(e) without the written consent of Tranche A Term
Loan Lenders and Tranche B Term Loan Lenders having in the aggregate more
than 50% of the sum of the outstanding Term Loans,
(viii) amend, modify or waive the order of application of
prepayments specified in subsection 2.9(g) or 2.9(i) without the written
consent of (w) in the case of subsection 2.9(g), Revolving Credit Lenders
the Revolving Credit Commitment Percentages of which aggregate more than
50%, (x) Tranche A Term Loan Lenders the Tranche A Term Loan Percentages
of which aggregate more than 50%, and (y) the Required Tranche B Term
Loan Lenders,
(ix) amend, modify or waive the provisions of Section 3, any
Letter of Credit or any L/C Obligation without the written consent of
each relevant Issuing Lender and Revolving Credit Lenders the Revolving
Credit Commitment Percentages of which aggregate more than 50%,
(x) (A) amend, modify or waive any provision of subsection 5.2 or
Section 4 (after the Closing Date only), 6 (other than the Shared
Affirmative Covenants) or 7 (or any definitions incorporated by
reference) or subsection 9 or any definitions to the extent used therein
or (B) waive any Default or Event of Default under subsection 9 or any
consequences of such Default or Event of Default, in each case, without
the written consent of the Required Basic Lenders (it being agreed that
the consent of the Required Lenders shall not be required for any such
amendment, modification or waiver),
(xi) (A) amend, modify or waive any provision of Section 8 (or any
of the covenants or definitions incorporated therein by reference) or
subsection 9.3 or any definitions to the extent used therein or (B) waive
any Default or Event of Default under subsection 9.3 or any consequences
of such Default or Event of Default, in each case, without the written
consent of the Required Tranche B Term Loan Lenders (it being agreed that
the consent of the Required Lenders shall not be required for any such
amendment, modification or waiver),
(xii) reduce the percentage specified in the definition of
Required Tranche B Term Loan Lenders without the written consent of all
of the Tranche B Term Loan Lenders,
(xiii) amend, modify or waive any provision of any Security
Document that provides for the ratable sharing by the Lenders of the
proceeds of any realization on the Collateral to provide for a
non-ratable sharing thereof, without the written consent of (w) Revolving
Credit Lenders the Revolving Credit Commitment Percentages of
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which aggregate more than 50%, (x) Tranche A Term Loan Lenders the
Tranche A Term Loan Percentages of which aggregate more than 50% and (y)
the Required Tranche B Term Loan Lenders, or
(xiv) amend the definition of "Required Basic Lenders" without the
written consent of all the Basic Lenders, or
(xv) amend the first two sentences of subsection 2.15(a) without
the written consent of each Lender adversely affected thereby.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Administrative Agent and all future holders of the Notes. In the
case of any waiver, the Borrower, the Lenders and the Administrative Agent shall
be restored to their former position and rights hereunder and under the
outstanding Notes and any other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or four days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received (provided it is also mailed), addressed as follows in the case of the
Borrower and the Administrative Agent, and as set forth in Schedule I in the
case of the other parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the Notes
and the Term Notes:
The Borrower: The General Chemical Group Inc.
90 East Halsey Road
Parsippany, New Jersey 07054
Attention: Chief Financial Officer
Telecopy: (973) 515-1997
General Chemical Corporation
90 East Halsey Road
Parsippany, New Jersey 07054
Attention: General Counsel
Telecopy: (973) 515-3244
The Administrative Agent: The Chase Manhattan Bank
270 Park Avenue, 38th Floor
New York, New York 10017
Attention: Elizabeth Swerz
Telecopy: (212) 270-7939
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with a copy to: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
One Chase Manhattan Plaza
New York, New York 10081
Attention: Dan Fisher
Telecopy: (212) 552-5777
The Issuing Banks: Chase Manhattan Bank Delaware
1201 North Market Street
8th Floor
Wilmington, Delaware 19801
Attention: Michael Handago
Telecopy: (302) 428-3390
The Chase Manhattan Bank
270 Park Avenue, 38th Floor
New York, New York 10017
Attention: Elizabeth Swerz
Telecopy: (212) 270-7939
PROVIDED that any notice, request or demand to or upon the Administrative Agent,
the Issuing Banks or the Lenders pursuant to subsection 2.2, 2.4, 2.8, 2.9, 2.10
or 3.2 shall not be effective until received.
11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the extensions of credit hereunder.
11.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a)
to pay or reimburse the Administrative Agent and the Issuing Banks for all their
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent and the Issuing Banks in the amounts agreed to with such
counsel, (b) to pay or reimburse each Lender, the Issuing Banks and the
Administrative Agent for all
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their reasonable out-of-pocket costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, to the
Issuing Banks and to the several Lenders, (c) to pay, indemnify, and hold each
Lender, the Issuing Banks and the Administrative Agent harmless from, any and
all recording and filing fees and any and all liabilities with respect to, or
resulting directly from any delay not caused by the Administrative Agent or the
Lenders in paying, stamp, excise and other documentary taxes, if any, which may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender, the
Issuing Banks and the Administrative Agent and each of their officers,
directors, employees and agents harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, out-of-pocket expenses or disbursements of any kind or nature whatsoever
incurred in connection with the execution, delivery, enforcement, performance
and administration of this Agreement, the other Loan Documents and any such
other documents, including, without limitation, any of the foregoing relating to
the violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Borrower, any of its Subsidiaries or any of
the Properties (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"), provided, that the Borrower shall have no obligation
hereunder to the Administrative Agent, any Issuing Bank, any Lender with respect
to indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Administrative Agent, such Issuing Bank or any such Lender
(ii) legal proceedings commenced against the Administrative Agent, any Issuing
Bank or any such Lender by any security holder or creditor thereof arising out
of and based upon rights afforded any such security holder or creditor solely in
its capacity as such or (iii) legal proceedings commenced against the
Administrative Agent, any Issuing Bank or any Lender by the Borrower or any
Affiliate, in which the Borrower or such Affiliate is the prevailing party
(unless the Administrative Agent, Issuing Bank or such Lender is also a
prevailing party, in which case the indemnification obligations of the Borrower
hereunder shall be adjusted to reflect the relative recoveries and faults of the
parties to such litigation). The Borrower shall have no obligation under this
subsection 11.5 for the consequential damages of the Administrative Agent, any
Issuing Bank any Lender. The agreements in this subsection shall survive
repayment of the Loans, and all other amounts payable hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Issuing Banks, the Administrative Agent, all future
holders of the Loans and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time sell to one or more banks or
other entities ("PARTICIPANTS") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Revolving Credit Commitment or
L/C Commitment of such Lender or any other interest of
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such Lender hereunder and under the other Loan Documents. In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement and the other Loan Documents, and the Borrower
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents; PROVIDED that such Bank shall reserve
solely unto itself, and shall not grant to any Participant, any part or all of
its right to agree to the amendment, modification or waiver of any of the terms
of this Agreement or other Loan Document or any document related thereto, except
for any such amendment, modification or waiver that would reduce the principal
of, or interest on the Loans, participating interests in the Letters of Credit
or any fees payable hereunder, in each case subject to such participation, or
postpone the date of the final maturity of, or any scheduled date fixed for
payment of interest on, the Loans or any Reimbursement Obligation, in each case
to the extent subject to such participation. The Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall, to the maximum extent permitted by applicable law, be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement or any Note, PROVIDED that, in purchasing such participating interest,
such Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 11.7(a) as fully as if it were a
Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of subsections 2.17, 2.18 and 2.19 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender; PROVIDED that, in the case of subsection 2.18, such
Participant shall have complied with the requirements of said subsection as if
it were a Lender and PROVIDED, FURTHER, that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in accordance with applicable law, at any
time and from time to time assign to any Lender or any Affiliate thereof or to
an Approved Fund, or, with the consent of the Borrower, the Issuing Banks (in
the case of assignments under the Revolving Credit Commitments) and the
Administrative Agent (which in each case shall not be unreasonably withheld), to
an additional bank, fund (as long as such fund invests in bank loans) or other
financial institution (an "ASSIGNEE") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit C, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an Affiliate thereof or an Approved Fund, by the Borrower, the Issuing Banks (in
the case of assignments under the Revolving Credit Commitments) and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register. Any such assignment by any Lender to
any Person which is not then a Lender or an Affiliate thereof or an Approved
Fund shall be in a minimum aggregate
<PAGE> 90
85
amount equal to at least $5,000,000 (or, if less, all of a Lender's interest
under this Agreement), unless otherwise agreed by the Borrower and the
Administrative Agent. Upon such execution, delivery, acceptance and recording,
from and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Revolving Credit Commitment and/or
Loans as set forth therein, and (y) the assigning Lender thereunder shall, to
the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this subsection to the contrary,
the consent of the Borrower to an assignment shall not be required at any time
when an Event of Default under subsection 9.1 or paragraph (a) of subsection 9.2
or paragraph (a) of subsection 9.3 shall have occurred and be continuing.
(d) The Administrative Agent shall maintain at its address
referred to in subsection 11.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "REGISTER") for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loans and any Notes evidencing such
Loans recorded therein for all purposes of this Agreement. Any assignment of any
Loan, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or part of a
Loan evidenced by a Note shall be registered on the Register only upon surrender
for registration of assignment or transfer of the Note evidencing such Loan,
accompanied by a duly executed Assignment and Acceptance; thereupon one or more
new Notes in the same aggregate principal amount shall be issued to the
designated Assignee, and the old Notes shall be returned by the Administrative
Agent to the Borrower marked "cancelled". The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an Affiliate thereof or an Approved Fund, by the Borrower,
the Issuing Banks (in the case of assignments under the Revolving Credit
Commitments) and the Administrative Agent) together with payment to the
Administrative Agent of a registration and processing fee of $3,500 (which the
fee shall not be payable in connection with an assignment by a Lender to an
Affiliate thereof), the Administrative Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date determined pursuant
thereto record the information contained therein in the Register and give notice
of such acceptance and recordation to the Lenders, the Issuing Banks and the
Borrower. On or prior to such effective date, the Borrower, at its own expense,
upon request, shall execute and deliver to the Administrative Agent (in exchange
for the Notes of the assigning Lender) new Notes to the order of such Assignee
in an amount equal to the Revolving Credit Commitment and/or applicable Term
<PAGE> 91
86
Loans, as the case may be, assumed or acquired by it pursuant to such Assignment
and Acceptance and, if the assigning Lender has retained a Revolving Credit
Commitment and/or Term Loans, as the case may be, upon request, new Notes to the
order of the assigning Lender in an amount equal to the Revolving Credit
Commitment and/or applicable Term Loans, as the case may be, retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be
in the form of the Notes replaced thereby.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee,
subject to the provisions of subsection 11.15, any and all financial information
in such Lender's possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
11.7 ADJUSTMENTS; SET-OFF. (a) Except to the extent that
this Agreement provides for payments to be allocated to a particular Lender or
to the Lenders under a particular Facility, if any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of the Obligations
owing to it, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in subsection 9.1, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Obligations, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Obligations, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower.
<PAGE> 92
87
Each Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such set-off and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
11.8 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 INTEGRATION. This Agreement and the other Loan
Documents represent the agreement of the Borrower, the Administrative Agent, the
Issuing Banks and the Lenders with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Administrative Agent, the Issuing Banks or any Lender relative to subject matter
hereof not expressly set forth or referred to herein or in the other Loan
Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially
<PAGE> 93
88
similar form of mail), postage prepaid, to the Borrower at its address
set forth in subsection 11.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages; PROVIDED that any such waiver shall not apply
with respect to claims arising from the gross negligence or willful
misconduct of the Administrative Agent, any Issuing Bank or any Lender.
11.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE
ADMINISTRATIVE AGENT, THE ISSUING BANKS AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
11.15 CONFIDENTIALITY. Each Lender agrees to keep
confidential all non-public information provided to it by the Borrower pursuant
to this Agreement that is designated by the Borrower in writing as confidential;
PROVIDED that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Administrative Agent or any other Lender, (ii) to any
Transferee which executes a Confidentiality Agreement substantially in the form
of Exhibit D hereto, (iii) to its employees, directors, agents, attorneys,
accountants and other professional advisors, (iv) upon the request or demand of
any Governmental Authority (including, without limitation, the National
Association of Insurance Commissioners) having jurisdiction over such Lender,
(v) in response to any order of any court or other
<PAGE> 94
89
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) which has been publicly disclosed other than in breach
by such Lender of this Agreement, (vii) in connection with the exercise of any
remedy hereunder, (viii) in connection with periodic regulatory examinations,
(ix) in connection with any litigation to which such Lender may be a party, (x)
to any direct or indirect contractual counterparty in swap agreements or such
contractual counterparty's professional advisor (so long as such contractual
counterparty or professional advisor to such contractual counterparty (A) has
been approved in writing by the Borrower and (B) agrees in a writing enforceable
by the Borrower to be bound by the provisions of this subsection 11.15) and (xi)
if, prior to such information having been so provided or obtained, such
information was already in the Administrative Agent's or a Lender's possession
on a nonconfidential basis without a duty of confidentiality to the Borrower
being violated.
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
THE GENERAL CHEMICAL GROUP INC.
By:
----------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent, as an
Issuing Bank and as a Lender
By:
----------------------------
Title:
CHASE MANHATTAN BANK DELAWARE,
as an Issuing Bank
By:
----------------------------
Title:
BANK OF AMERICA NT & SA, as
Documentation Agent and as a
Lender
By:
----------------------------
Title:
THE BANK OF NOVA SCOTIA, as
Syndication Agent and as a
Lender
By:
----------------------------
Title:
<PAGE> 1
Exhibit 11(c)(1)
Execution Copy
--------------
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
DEFIANCE, INC.
DN ACQUISITION CORPORATION
NEW HAMPSHIRE OAK, INC.
Dated as of January 7, 1999
================================================================================
Agreement and Plan of Merger
<PAGE> 2
TABLE OF CONTENTS
Page
1. THE OFFER..................................................................1
1.1 The Offer...........................................................1
1.2 Company Action......................................................2
1.3 Board of Directors..................................................3
2. THE MERGER.................................................................4
2.1 Merger...........................................................4
2.2 Effect of Merger.................................................4
2.3 Conversion of Shares; Merger Consideration.......................4
2.4 Stock Options....................................................5
2.5 Consummation of the Merger.......................................5
2.6 Dissenters' Rights...............................................5
2.7 Payment for Shares and Options...................................6
2.8 Closing of the Company's Transfer Books..........................7
3. REPRESENTATIONS AND WARRANTIES.............................................8
3.1 Representations and Warranties of Parent
and the Purchaser.............................................8
3.2 Representations and Warranties of the Company...................10
4. COVENANTS.................................................................20
4.1 Acquisition Transactions........................................20
4.2 Interim Operations..............................................22
4.3 Access and Information..........................................24
4.4 Certain Filings, Consents and Arrangements......................25
4.5 Reasonable Best Efforts.........................................25
4.6 Public Statements...............................................25
4.7 Stockholder Approval............................................26
4.8 Stockholder Litigation..........................................27
4.9 Indemnification, Exculpation and Insurance......................27
4.10 Borrowings under the Loan Agreement.............................28
5. CONDITIONS................................................................28
5.1 Conditions to the Obligations of Parent, the Purchaser
and the Company..............................................28
5.2 Conditions to the Obligations of Parent
and the Purchaser............................................29
6. MISCELLANEOUS.............................................................30
6.1 Termination.....................................................30
Agreement and Plan of Merger
<PAGE> 3
6.2 Non-Survival of Representations and Warranties..................32
6.3 Amendment and Waiver............................................32
6.4 Entire Agreement................................................32
6.5 Definition......................................................32
6.6 Applicable Law..................................................33
6.7 Headings........................................................33
6.8 Notices.........................................................33
6.9 Counterparts....................................................34
6.10 Severability....................................................34
6.11 Parties in Interest; Assignment.................................34
6.12 Fees and Expenses...............................................35
6.13 Specific Performance............................................36
Agreement and Plan of Merger
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER dated as of January 7, 1999 by and among
New Hampshire Oak, Inc., a Delaware corporation ("Parent"), DN Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (the
"Purchaser"), and Defiance, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Parent, the
Purchaser and the Company each has determined that it is fair to, and in the
best interests of, their respective stockholders for Parent to acquire the
Company pursuant to a merger (the "Merger") in which the Purchaser shall be
merged with and into the Company pursuant to this Agreement;
WHEREAS, as a condition of the willingness of the Parent to enter
into this Agreement, the Persons (as defined in Section 6.5) set forth on
Exhibit A, as the holders of shares of the Company's Common Stock, par value
$.05 per share (the "Common Stock"), have entered into the Stockholders
Agreement, dated as of the date hereof (the "Stockholders Agreement"), with the
Parent, which provides, among other things, that, subject to the terms and
conditions thereof, each Person will tender such Person's shares of Common Stock
in the Offer (as defined below) and vote such shares of Common Stock in favor of
the Merger and the approval and adoption of this Agreement;
WHEREAS, in furtherance thereof, the Parent proposes that the
Purchaser make an offer to purchase for cash all of the issued and outstanding
shares of Common Stock of the Company at a price of $9.50 per share net to the
seller; and
WHEREAS, the Boards of Directors of the Parent, the Purchaser and the
Company have approved the Merger following the expiration of such offer, upon
the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties agree as follows:
1. THE OFFER
---------
1.1 THE OFFER. (a) As promptly as practicable, but in no event later
than five (5) business days after the public announcement of the execution of
this Agreement, the Purchaser shall, and the Parent shall cause the Purchaser
to, commence a tender offer (the "Offer") to purchase for cash all of the issued
and outstanding shares of Common Stock (the shares of Common Stock hereinafter
referred to as the "Shares") at a price of not less
Agreement and Plan of Merger
<PAGE> 5
than $9.50 per Share net to the seller in cash. The obligations of the Purchaser
and the Parent to consummate the Offer and to accept for payment and purchase
the Shares tendered shall be subject only to the conditions set forth in Annex A
hereto. The Purchaser shall not without the Company's prior written consent
reduce the price per Share or the number of Shares sought to be purchased or
modify the form of consideration to be received by holders of the Shares in the
Offer, decrease, increase or waive the condition (the "Minimum Condition") set
forth in clause (i) of the first sentence of Annex A hereto, impose additional
conditions to the Offer or amend any term of the Offer in a manner materially
adverse to the holders of the Shares. Subject only to the conditions of the
Offer set forth in Annex A, the Purchaser shall, and the Parent shall cause the
Purchaser to, pay for all of the Shares validly tendered and not withdrawn
pursuant to the Offer as soon as legally permissible.
(b) As soon as practicable on the date the Offer is commenced, the
Parent and the Purchaser will file with the Securities and Exchange Commission
(the "Commission") a Tender Offer Statement on Schedule 14D-1 (together with all
supplements or amendments thereto, and including all exhibits, the "Offer
Documents"). The Parent and the Purchaser shall give the Company and its counsel
a reasonable opportunity to review the Offer Documents prior to the filing of
the Offer Documents with the Commission or to the dissemination of the Offer
Documents to the stockholders of the Company. The Parent and the Purchaser will
furnish the Company and its counsel in writing with any comments that the
Parent, the Purchaser or their counsel may receive from the Commission or its
staff with respect to the Offer Documents, promptly after receipt of such
comments.
1.2 COMPANY ACTION. (a) In connection with the Offer, the Company
shall cause its transfer agent to furnish the Purchaser with mailing labels,
security position listings and any available listings or computer files
containing the names and addresses of record holders of the Shares as of a
recent date, and shall furnish to the Purchaser such information and assistance
as the Parent or the Purchaser may reasonably request in communicating the
Offer to the Company's stockholders. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in such labels, listings and filings, will
use such information only in connection with the Offer and, if this Agreement is
terminated, will, upon the request of the Company deliver or cause to be
delivered to the Company all copies of such information then in its possession
or in the possession of its agents or representatives.
(b) The Company hereby consents to the Offer and represents that the
Board of Directors of the Company (at a meeting duly called and held at which a
quorum was present) as part of its approval of this Agreement has unanimously
(i) approved the Offer, the Merger, the Stockholders Agreement, the amendment to
the Certificate of
2
Agreement and Plan of Merger
<PAGE> 6
Incorporation of the Company contemplated by Section 2.2 of this Agreement and
the transactions contemplated by this Agreement, (ii) determined that each of
the Offer and the Merger is advisable and is fair to and in the best interests
of the stockholders of the Company and (iii) resolved to recommend acceptance of
the Offer and approval and adoption of this Agreement by the stockholders of
the Company (to the extent such approval and adoption is required by applicable
law). Promptly after the commencement of the Offer, the Company shall file a
Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 (together
with any amendments or supplements thereto, and including all exhibits, the
"Schedule 14D-9") with respect to the Offer, which shall contain the
recommendations of the Board of Directors in favor of the Offer, the Merger and
the Agreement, except to the extent that the Board of Directors of the Company
shall have withdrawn or modified its approval of the Offer, the Merger and this
Agreement in accordance with Section 4.1(b).
1.3 BOARD OF DIRECTORS. (a) Promptly upon the purchase by the
Purchaser of more than 50% of the outstanding Shares on a fully-diluted basis
pursuant to the Offer and from time to time thereafter, the Company shall use
its best efforts to allow the Purchaser to designate up to the minimum number of
directors necessary in order for the result (expressed as a fraction) derived by
dividing the number of directors so designated by the total number of directors
to be at least equal to the result (expressed as a fraction) derived by dividing
the Shares then held by the Purchaser by the total number of Shares then
outstanding; PROVIDED, HOWEVER, that until the Effective Time (as defined in
Section 2.5 hereof) the Board of Directors will have at least two (2)
Independent Directors (as defined in Section 1.3(c) hereof). Upon request by the
Purchaser, the Company shall use its best efforts promptly, at the Company's
election, either to increase the size of the Board or to secure the resignation
of such number of directors as is necessary to enable the Purchaser's designees
to be elected to the Board, and to cause the Purchaser's designees to be so
elected.
(b) The Company's obligations with respect to the election of the
Purchaser's designees to the Board of Directors of the Company shall be subject
to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.3 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1. The Parent and the
Purchaser will supply to the Company in writing and shall be solely responsible
for any information with respect to any of them and their nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
3
Agreement and Plan of Merger
<PAGE> 7
(c) Following the election or appointment of the Purchaser's
designees pursuant to this Section 1.3 and prior to the Effective Time, any
amendment to this Agreement or of the Certificate of Incorporation or By-Laws of
the Company, any termination of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the obligations or other
acts of the Parent or the Purchaser and any waiver of any of the Company's
rights under this Agreement will require the concurrence of a majority of the
directors of the Company then in office who are neither designated by the
Purchaser nor otherwise affiliated with the Parent or the Purchaser nor
employees of the Company or any of its subsidiaries (the "Independent
Directors").
2. THE MERGER
----------
2.1 MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the applicable provisions of the Delaware
General Corporation Law ("DGCL"), as promptly as practicable following the
consummation of the Offer, the Purchaser shall be merged with and into the
Company. The Company shall be the surviving corporation in the Merger (sometimes
referred to as the "Surviving Corporation") and shall continue its existence
under the laws of the State of Delaware. At the Effective Time (as defined in
Section 2.5), the separate existence of the Purchaser shall cease. The name of
the Surviving Corporation shall be "Defiance, Inc."
2.2 EFFECT OF MERGER. The Certificate of Incorporation and Bylaws of
the Company shall be amended by virtue of the Merger to read in their entirety
as set forth in Exhibits B and C, respectively. The directors of the Purchaser
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, and the officers set forth on Schedule 2.2 hereto shall be the
officers of the Surviving Corporation, in each case until their respective
successors are duly elected and qualified. The Merger shall have the effects set
forth in Section 259 of the DGCL.
2.3 CONVERSION OF SHARES; Merger Consideration. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
thereof: (a) each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be canceled pursuant to clause (b) below
and any Dissenting Shares (as defined in Section 2.6)) shall be converted into
the right to receive in cash an amount per Share equal to the Merger
Consideration (as defined below), subject to any required withholding of taxes
and without interest; (b) each Share owned by Parent, the Purchaser or any other
direct or indirect subsidiary of Parent, or held in the treasury of the Company,
immediately prior to the Effective Time, shall be canceled and extinguished, and
no payment will be made with respect to those Shares; and (c) all shares of
common stock of the Purchaser, par value $.01 per share, then issued and
outstanding shall be converted into an equal
4
Agreement and Plan of Merger
<PAGE> 8
number of shares of common stock of the Surviving Corporation. "Merger
Consideration" means $9.50 per Share or, if a greater price shall have been paid
in the Offer, such greater price.
2.4 STOCK OPTIONS. Immediately prior to the Effective Time, each then
outstanding option to purchase Shares (collectively, the "Options"), whether or
not then exercisable, shall be canceled by the Company in exchange for a right
to receive a payment in cash in accordance with Section 2.7(b) (the "Option
Consideration") equal to the product of (i) the number of Shares previously
subject to the Option and (ii) the excess, if any, of the Merger Consideration
over the exercise price for each Share under such Option. As of the Effective
Time, each holder of an Option will be entitled to receive only an amount equal
to the Option Consideration. All amounts payable under this Section 2.4 shall be
subject to any required withholding of taxes and shall be paid without interest.
Effective as of the Effective Time and subject to payment of the Option
Consideration, the Company shall cause each stock option or other equity based
plan maintained with respect to any Shares (or rights in respect thereof) to be
terminated. The Company shall use its best efforts to cause each holder of an
Option, whether or not then exercisable, to execute an agreement consenting to
the cancellation immediately prior to the Effective Time of such holder's
Options in exchange for such holder's right to receive the Option Consideration.
2.5 CONSUMMATION OF THE MERGER. Upon the terms and subject to the
conditions of this Agreement, the Company shall execute in the manner required
by the DGCL, and deliver to the Secretary of State of the State of Delaware, a
duly executed certificate of merger as required by the DGCL, and the parties
shall take all such other and further actions as may be required by law to make
the Merger effective. Prior to the filing referred to in this Section 2.5, a
closing will be held at the offices of Debevoise & Plimpton, 875 Third Avenue,
New York, New York, on the third business day following the satisfaction of the
condition set forth in Section 5.1(c) hereof (or, in the event the Purchaser
shall acquire at least 90% of the outstanding Shares in the Offer, on the tenth
business day following the completion of the Offer) (or such other time as the
Purchaser and the Company may agree, immediately after the conditions set forth
in Article V have been satisfied or waived) for the purpose of confirming all of
the foregoing. The time the Merger becomes effective in accordance with
applicable law is referred to as the "Effective Time".
2.6 DISSENTERS' RIGHTS. Notwithstanding any provision of this
Agreement to the contrary, any shares of capital stock of the Company
outstanding immediately prior to the Effective Time held by a holder who has
demanded and perfected the right, if any, for appraisal of those shares in
accordance with the provisions of Section 262 of the DGCL and as of the
Effective Time has not withdrawn or lost such right to such appraisal
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Agreement and Plan of Merger
<PAGE> 9
("Dissenting Shares") shall not be converted into or represent a right to
receive the consideration set forth in Section 2.3, but the holder shall only be
entitled to such rights as are granted by the DGCL. If a holder of shares of
capital stock of the Company who demands appraisal of those shares under the
DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the Effective Time or the
occurrence of such event, whichever last occurs, those shares shall be converted
into and represent only the right to receive the consideration as provided in
Section 2.3, without interest, upon the surrender of the certificate or
certificates representing those shares. The Company shall give the Parent (i)
prompt notice of any written demands for appraisal of any shares of capital
stock of the Company, attempted withdrawals of such demands, and any other
instruments served pursuant to the DGCL received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisals of
capital stock of the Company, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
2.7 PAYMENT FOR SHARES AND OPTIONS. (a) SHARES. Prior to the
Effective Time, the Purchaser shall designate American Stock Transfer & Trust
Company to act as Paying Agent with respect to the Merger (the "Paying Agent").
Each holder (other than Parent, the Purchaser or any subsidiary of Parent) of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding Shares will be entitled to receive, upon
surrender to the Paying Agent of the Certificates for cancellation, cash in an
amount equal to the product of the number of Shares previously represented by
the Certificates multiplied by the Merger Consideration, subject to any required
withholding of taxes. At or prior to the Effective Time, the Purchaser shall
make available to the Paying Agent sufficient funds to make all payments
pursuant to the preceding sentence. No interest shall accrue or be paid on the
cash payable upon the surrender of the Certificates. If payment is to be made to
a person other than the person in whose name the Certificates surrendered are
registered, it shall be a condition of payment that the Certificates so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting the payment shall pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificates surrendered or establish to the satisfaction of the
Surviving Corporation that the tax has been paid or is not applicable. Following
the Effective Time, until surrendered to the Paying Agent in accordance with the
provisions of this Section 2.7(a), each Certificate shall represent for all
purposes only the right to receive upon surrender thereof the Merger
Consideration multiplied by the number of Shares evidenced by the Certificate,
without any interest, subject to any required withholding taxes. Any funds
delivered or made available to the Paying Agent pursuant to this Section 2.7(a)
and not exchanged for
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Agreement and Plan of Merger
<PAGE> 10
Certificates within six (6) months after the Effective Time will be returned by
the Paying Agent to the Surviving Corporation, which thereafter will act as
Paying Agent, subject to the rights of holders of unsurrendered Certificates
under this Section 2.7(a), and any former stockholders of the Company who have
not previously exchanged their Certificates will thereafter be entitled to look
only to the Surviving Corporation for payment of their claim for the
consideration set forth in Section 2.3, without any interest, but will have no
greater rights against the Surviving Corporation than may be accorded to general
creditors thereof under applicable law. Notwithstanding the foregoing, neither
the Paying Agent nor any party hereto shall be liable to a holder of Shares for
any cash or interest delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws. If any Certificates shall not have
been surrendered prior to three (3) years after the Effective Time (or
immediately prior to such earlier date on which any payment in respect hereof
would otherwise escheat to or become the property of any governmental unit or
agency), the payment in respect of such Certificates shall, to the extent
permitted by applicable laws, become the property of the Surviving Corporation,
free and clear of all claims of interest of any person previously entitled
thereto. As soon as practicable after the Effective Time (but not later than
five (5) business days after the Effective Time), the Surviving Corporation will
cause the Paying Agent to mail to each record holder of Certificates a form of
letter of transmittal (which will specify that delivery will be effected, and
risk of loss and title to the Certificates will pass, only upon proper delivery
of the Certificates to the Paying Agent) and instructions for use in effecting
the surrender of the Certificates for payment.
(b) OPTIONS. Each holder of an Option, whether or not then
exercisable, will be entitled to receive cash in an amount equal to the Option
Consideration in respect of such Options (determined in accordance with Section
2.4 hereof), subject to any required withholding taxes and without interest. As
soon as practicable after the Effective Time, and in any event no more than
fifteen (15) calendar days following the Effective Time, the Surviving
Corporation shall instruct the Paying Agent to pay, and the Paying Agent shall
so pay, all amounts due as Option Consideration to holders of Options as
required by this Agreement.
2.8 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
Shares converted into the right to receive the Merger Consideration pursuant to
the terms hereof, Dissenting Shares or Shares to be canceled pursuant to Section
2.3 hereof shall thereafter be made. If, after the Effective Time, Certificates
for such Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for cash or merely canceled, as the case may be, pursuant
to and in accordance with Sections 2.3, 2.6 and 2.7 hereof, subject to
applicable law in the case of Dissenting Shares.
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Agreement and Plan of Merger
<PAGE> 11
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. The
Parent and the Purchaser represent and warrant to the Company that:
(a) CORPORATE ORGANIZATION. Each of the Parent and the 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 power to
carry on its business as it is now being conducted. Parent owns all of the
issued and outstanding capital stock of the Purchaser and all such stock
has been validly issued and is fully paid and nonassessable and is owned
by the Parent free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Each of Parent and the Purchaser is qualified to
do business and is in good standing in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Parent. "Material Adverse Effect" means, with respect to any
person or entity, a material adverse effect on the business, assets,
liabilities, operations or condition (financial or otherwise) of such
person or entity and its subsidiaries, taken as a whole. True, accurate
and complete copies of the Parent's and the Purchaser's Certificates of
Incorporation and Bylaws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been made available to
the Company.
(b) AUTHORITY. Each of Parent and the Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
carry out their respective obligations pursuant hereto. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
or other action on the part of each of Parent and the Purchaser. This
Agreement has been duly executed by Parent and the Purchaser and, assuming
due authorization, execution and delivery by the Company, constitutes a
valid and binding obligation of each of them, enforceable against each of
them in accordance with its terms. No other corporate actions or
proceedings on the part of Parent or the Purchaser are necessary to
authorize this Agreement, the consummation, by either of them, of the
transactions contemplated hereby or the discharge, by either of them, of
their respective obligations pursuant hereto.
(c) CONSENTS; NO VIOLATION. None of the execution and delivery of
this Agreement by Parent or the Purchaser, the consummation by each of
them of the transactions contemplated by this Agreement or the discharge,
by either of them, of
8
Agreement and Plan of Merger
<PAGE> 12
its respective obligations hereunder will (i) conflict with, or result in
any breach or violation of, any provision of the Parent's or the
Purchaser's Certificate of Incorporation or By-laws; (ii) constitute, with
or without notice, the passage of time or both, a breach, violation or
default, create a lien, or give rise to any right of termination,
modification, cancellation, prepayment, acceleration or loss of any
material benefit, under any law, order, judgment, writ, injunction,
decree, statute, rule or regulation, governmental permit or license
(collectively "Laws"), or any mortgage, indenture, lease, license,
agreement or other instrument of Parent, the Purchaser or any of their
respective subsidiaries, or to which Parent, the Purchaser or any of their
respective subsidiaries or any of their respective properties is subject,
except for breaches, violations, defaults, liens, or rights of
termination, modification, cancellation, prepayment or acceleration which
would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on Parent or materially adversely affect
the ability of Parent or the Purchaser to consummate the transactions
contemplated hereby; or (iii) require any consent, approval or
authorization of, notification to, or filing with, any court, governmental
agency or regulatory or administrative authority, foreign or domestic
(each, a "Governmental Entity") or any other third party, on the part of
Parent or the Purchaser, other than (w) the filing of a certificate of
merger with respect to the Merger in accordance with the DGCL, (x) any
applicable filings under federal or state securities, "Blue Sky" or state
anti-takeover laws (including, without limitation, any filings required
under Section 1707.041 of the Ohio Revised Code), (y) filings required
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (z) consents, approvals, authorizations,
notifications or filings the failure of which to be obtained or made would
not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Parent or materially adversely affect the
ability of Parent or the Purchaser to consummate the transactions
contemplated hereby.
(d) OFFER DOCUMENTS; SCHEDULE 14D-9. None of the Offer Documents
will, on the date filed with the Commission or on the date first
published, sent or given to the Company's stockholders, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that the foregoing shall not apply to the extent that
any such untrue statement of a material fact or omission to state a
material fact was made by the Parent or the Purchaser in reliance upon and
in conformity with written information furnished to the Parent or the
Purchaser by the Company specifically for use in the Offer Documents. The
Offer Documents will comply in all material respects, both as to form and
otherwise, with the requirements of the Exchange Act and the rules and
regulations thereunder. None of the information supplied or to be
9
Agreement and Plan of Merger
<PAGE> 13
supplied in writing by the Parent or the Purchaser specifically for
inclusion in the Schedule 14D-9 will, at the time the Schedule 14D-9 is
filed with the Commission 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.
(e) FINANCING. Parent and the Purchaser, collectively, at the
expiration of the Offer and the Effective Time will have sufficient funds
available to pay the aggregate Merger Consideration and Option
Consideration contemplated by this Agreement and to pay all of its fees
and expenses related to the transactions contemplated hereby.
(f) BENEFICIAL OWNERSHIP. None of Parent, the Purchaser, or any of
their affiliates "beneficially own" (as such term is defined in the
Stockholders Agreement) any equity securities of the Company other than
equity securities of the Company beneficially owned by Parent or the
Purchaser as a result of the Stockholders Agreement.
(g) CHANGE OF CONTROL. Parent and the Purchaser are familiar with and
have reviewed both the Company's Change of Control Policy set forth on the
Disclosure Schedule and the agreements set forth on the Disclosure
Schedule which the Company has made with employees regarding change of
control.
3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and the Purchaser that:
(a) CORPORATE ORGANIZATION. Each of the Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power to own, lease and operate its
properties and assets and to carry on its businesses as they are now being
conducted. The Company has delivered to Parent copies of the Certificates
of Incorporation and By-laws, as amended to this date, of the Company and
each of its subsidiaries, which Certificates and By-laws are in full force
and effect.
(b) CAPITALIZATION. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, and 2,000,000 shares of
Preferred Stock, par value $.05 per share (the "Preferred Shares"). As of
the date hereof, (i) 6,003,749 Shares are issued and outstanding (other
than Shares held in the treasury of the Company as treasury stock), all of
which are validly issued, fully paid and nonassessable and not subject to
preemptive rights except as described on the Disclosure Schedule delivered
by the Company to Parent on or prior to the date hereof (the "Disclosure
Schedule"); (ii) 1,021,800 Shares are held in the treasury of the Company
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Agreement and Plan of Merger
<PAGE> 14
as treasury stock; (iii) there are outstanding Options to purchase an
aggregate of 440,814 Shares; (iv) there are no outstanding Preferred
Shares; and (v) there are no Shares or Preferred Shares owned by any
subsidiary of the Company. There are no stock appreciation rights
outstanding. The Disclosure Schedule sets forth a list, complete and
correct as of the date hereof, of the holders of all Options and the
number of Shares issuable upon the exercise of each such Option and the
exercise prices thereof. There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Company may vote. Except as set forth in this
Section 3.2(b), no shares of capital stock or other voting securities are
issued, reserved for issuance or outstanding, nor are there any
outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character relating to
the issued or unissued capital stock or other securities of the Company or
any of its subsidiaries obligating the Company or any of its subsidiaries
to issue, deliver, sell or purchase, or cause to be issued, delivered,
sold or purchased, any securities of the Company or any of its
subsidiaries. Except as set forth on the Disclosure Schedule, there are no
voting trusts or other agreements or understandings to which the Company
or any of its subsidiaries is a party with respect to the voting of
capital stock of the Company or any of its subsidiaries.
(c) SUBSIDIARIES. The Disclosure Schedule sets forth a list, true and
complete as of the date hereof, of all of the subsidiaries of the Company.
All of the outstanding shares of capital stock of each subsidiary of the
Company have been validly issued and are fully paid and nonassessable and
are owned by the Company or by a subsidiary of the Company, free and clear
of any Liens. Except for the capital stock of its subsidiaries or as set
forth on the Disclosure Schedule, as of the date hereof, the Company does
not own, directly or indirectly, any capital stock or other ownership
interest in any corporation, limited liability company, partnership, joint
venture or other entity.
(d) AUTHORITY. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to carry out its
obligations pursuant hereto. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the
Company, subject only, to the extent required by law, to approval by the
stockholders of the Company as provided in Section 4.7. This Agreement has
been duly executed and delivered by, and, assuming due authorization,
execution and delivery by Parent and the Purchaser, constitutes a valid
and binding obligation of, the Company. Except as set forth on the
Disclosure Schedule and for the approval by the stockholders of the
Company as provided in Section 4.7, no other
11
Agreement and Plan of Merger
<PAGE> 15
corporate actions or proceedings on the part of the Company or its
stockholders are necessary to authorize this Agreement, the Offer, the
Merger or the consummation of the transactions contemplated hereby or its
discharge of its obligations pursuant hereto.
(e) CONSENTS; NO VIOLATION. None of the execution and delivery of
this Agreement by the Company, the consummation of the transactions
contemplated hereby or the discharge of its obligations hereunder will,
except as set forth on the Disclosure Schedule, (i) conflict with, or
result in a breach or a violation of, any provision of the Certificate of
Incorporation or By-laws of the Company or any of its subsidiaries; (ii)
constitute, with or without notice, the passage of time or both, a breach,
violation or default, create a Lien, or give rise to any right of
termination, modification, cancellation, prepayment, acceleration or loss
of any material benefit, under any Laws or any mortgage, indenture, lease,
license, agreement or other instrument of the Company or any of its
subsidiaries, or to which the Company or any of its subsidiaries or any of
their respective properties is subject, except for breaches, violations,
defaults, liens, or rights of termination, modification, cancellation,
prepayment or acceleration which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on
the Company or materially adversely affect the ability of the Company to
consummate the transactions contemplated hereby; or (iii) require any
consent, approval or authorization of, notification to, or filing with,
any Governmental Entity or from any other third party, on the part of the
Company or any of its subsidiaries other than (v) required consents
identified on the Disclosure Schedule, (w) the filing of a certificate of
merger with respect to the Merger in accordance with the DGCL, (x) filings
required under the HSR Act, (y) any applicable filings under federal and
state securities laws or state anti-takeover laws, and (z) consents,
approvals, authorizations, notifications or filings the failure of which
to be obtained or made would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on the Company or
materially adversely effect the ability of the Company to consummate the
transactions contemplated hereby.
(f) SEC REPORTS; COMPANY ASSETS AND LIABILITIES. The Company has
filed all forms, reports, statements and schedules with the Commission
required to be filed pursuant to the Exchange Act, or other federal
securities laws, and the rules and regulations promulgated thereunder,
since July 1, 1996 (the "SEC Reports"). As of their respective filing
dates, the SEC Reports complied in all material respects with all
applicable requirements of the Exchange Act and such other federal
securities laws, and the rules and regulations promulgated thereunder, and
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 made therein, in light of the
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Agreement and Plan of Merger
<PAGE> 16
circumstances under which they were made, not misleading. The audited and
unaudited consolidated financial statements of the Company included (or
incorporated by reference) in the SEC Reports comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto,
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as stated in the
financial statements, including the related notes, and except that the
quarterly financial statements do not contain all of the footnote
disclosures required by generally accepted accounting principles) and
fairly present, in all material respects, the financial position of the
Company and its consolidated subsidiaries as of the respective dates
thereof and the results of their operations, stockholders' equity and cash
flows for the periods then ended, subject, in the case of the unaudited
financial statements, to normal year-end adjustments and any other
adjustments described therein. Except for liabilities and obligations
incurred in the ordinary course of business consistent with past practices
since the date of the most recent consolidated balance sheet included in
the SEC Reports, neither the Company nor any of its subsidiaries has
incurred any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) other than those reflected in
the SEC Reports and those incurred in connection with the transactions
contemplated hereby.
(g) NO MATERIAL ADVERSE CHANGE. Except as and to the extent disclosed
in the SEC Reports or as set forth in the Disclosure Schedule, since June
30, 1998, there has not been (i) any material adverse change in the
business, operations or condition (financial or other) of the Company and
its subsidiaries taken as a whole, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (iii) any
split, combination or reclassification of any of the Company's capital
stock or any issuance or the authorization of the issuance of any
securities in respect of or in substitution for shares of its capital
stock, (iv) any granting by the Company (x) to any executive officer or
other key employee of the Company of any increase in compensation, except
for normal increases in the ordinary course of business consistent with
past practice or as required under employment agreements in effect as of
the date of the most recent SEC Reports or set forth in the Disclosure
Schedule or (y) to any such executive officer of any increase in severance
or termination pay, except as was required under any employment, severance
or termination agreements in effect as of the date of the most recent SEC
Reports or set forth in the Disclosure Schedule, (v) any damage,
destruction or loss, whether or not covered by insurance, that could
reasonably be expected to have a Material Adverse Effect or (vi) except as
may have been required by a change in generally accepted accounting
principles or as disclosed in the SEC Reports, any change in accounting
methods, principles or
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Agreement and Plan of Merger
<PAGE> 17
practices by the Company or any of its subsidiaries materially affecting
its assets, liabilities or business.
(h) OFFER DOCUMENTS; SCHEDULE 14D-9. None of the information supplied
in writing by the Company specifically for inclusion in the Offer
Documents will, at the respective times the Offer Documents or any
amendments or supplements thereto are filed with the Commission, 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. The Schedule 14D-9 on the date filed with the Commission will
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; provided, however, that the foregoing shall not
apply to the extent that any such untrue statement of a material fact or
omission to state a material fact was made by the Company in reliance upon
and in conformity with written information furnished to the Company by the
Parent or the Purchaser specifically for use in the Schedule 14D-9. The
Schedule 14D-9 will comply in all material respects, both as to form and
otherwise, with the requirements of the Exchange Act and the rules and
regulations thereunder.
(i) LITIGATION. Except as disclosed in the SEC Reports or on the
Disclosure Schedule, there is no suit, action or proceeding pending or, to
the knowledge of the Company, threatened against or affecting the Company
or any of its subsidiaries that individually or in the aggregate would
reasonably be expected (i) to have a Material Adverse Effect on the
Company, (ii) as of the date hereof, to impair the ability of the Company
to perform its obligations under this Agreement in any material respect or
(iii) as of the date hereof, to delay in any material respect or prevent
the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or
any of its subsidiaries having, or which would reasonably be expected to
have a Material Adverse Effect on the Company.
(j) FEES. Except as set forth on the Disclosure Schedule, neither the
Company nor any of its subsidiaries has paid or become obligated to pay
any fee or commission to any broker, finder or intermediary or other
similar Person in connection with the transactions contemplated hereby or
in connection with any other offer to acquire the Company's shares or
assets.
(k) CERTIFICATE AND BY-LAWS. Neither the Certificate of Incorporation
nor the By-laws of the Company contains any provision that would require a
vote of the
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Agreement and Plan of Merger
<PAGE> 18
Company's stockholders in excess of a majority of the outstanding shares
of Company Common Stock in order to approve the Merger in accordance with
the terms of this Agreement.
(l) STATE TAKEOVER STATUTES. The Board of Directors of the Company
has approved the terms of this Agreement and the Stockholders Agreement
and the consummation of the Merger and the other transactions contemplated
by this Agreement and the Stockholders Agreement, and such approval is
sufficient to render inapplicable to the Merger and the other transactions
contemplated by this Agreement and the Stockholders Agreement the
provisions of Section 203 of the DGCL. Except as set forth on the
Disclosure Schedule, to the Company's knowledge, no state takeover statute
or similar statute or regulation applies or purports to apply to the
Merger, this Agreement or any of the transactions contemplated by this
Agreement, and no provision of the Certificate of Incorporation, By-laws
or other governing instruments of the Company or any of its subsidiaries
would, directly or indirectly, restrict or impair the ability of Parent to
vote, or otherwise to exercise the rights of a stockholder with respect
to, shares of the capital stock of Company and its subsidiaries that may
be acquired or controlled by Parent.
(m) EMPLOYEE BENEFIT PLANS: EMPLOYEE AGREEMENTS. The Disclosure
Schedule sets forth a true and complete list of each employee benefit plan
within the meaning set forth in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and each bonus,
incentive, deferred compensation, severance, termination, retention,
change of control, stock option or other equity-based performance or other
compensation plan, program, arrangement, policy or understanding, whether
written or unwritten, that is or has been maintained or established by the
Company or any other Person that, together with the Company, is treated as
a single employer under Section 414 of the Internal Revenue Code of 1986,
as amended (the "Code") (each a "Commonly Controlled Entity"), or to which
the Company or any Commonly Controlled Entity contributes or is obligated
or required to contribute or with regard to which the Company or any of
its Commonly Controlled Entities has knowledge of any event, transaction
or condition that would reasonably be expected to result in any material
liability at the Effective Time (collectively, the "Plans"). Each
employment agreement to which the Company or any of its subsidiaries is a
party, and each employee benefit plan adopted by the Company or any of its
subsidiaries, which in either case becomes effective or grants rights to
any person upon a "change of control" of the Company is set forth in the
Disclosure Schedule. True and complete copies of each such Plan and the
most recent annual report on Form 5500 for each such Plan have been
delivered to the Purchaser.
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Agreement and Plan of Merger
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Each Plan intended to be qualified under Section 401(a) of the Code
and the trust forming a part thereof has received a favorable
determination letter from the Internal Revenue Service (the "IRS") as to
its qualification under the Code and to the effect that each such trust is
exempt from taxation under Section 501(a) of the Code and the Company
knows of no event that has occurred since the date of such determination
that would reasonably be expected to adversely affect such qualification
or tax-exempt status.
Except as set forth in the Disclosure Schedule, no material liability
has been or, to the knowledge of the Company, is expected to be incurred
by the Company or any Commonly Controlled Entity (either directly or
indirectly, including as a result of an indemnification obligation or any
joint and several liability obligations) as the result of a violation of
Title I of ERISA or an "accumulated funding deficiency" as defined in
Section 412 of the Code or Section 302 of ERISA or under or pursuant to
Title IV of ERISA or the penalty or excise tax provisions of Chapter 43 of
Subtitle D of the Code relating to employee benefit plans, and the Company
knows of no event, transaction or condition that has occurred or exists
with respect to the Company's employee benefit plans that would reasonably
be expected to result in any such material liability to the Purchaser, the
Surviving Corporation or any Commonly Controlled Entity or any employee
benefit plan of the Surviving Corporation or any Commonly Controlled
Entity.
Except as otherwise set forth in the Disclosure Schedules, no benefit
that is payable, or which may become payable as a result of the
transactions contemplated hereunder, to any employee pursuant to any Plan
shall constitute an "excess parachute payment" (as defined in Section
280G(b)(1) of the Code) which is subject to the imposition of an excise
tax under Section 4999 of the Code or which would not be deductible by
reason of Section 280G of the Code.
(n) COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the SEC
Reports, the Company and each of its subsidiaries has in effect all
Federal, state and local governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and there has
occurred no default under any such Permit, except for the lack of Permits
and for defaults under Permits which lack of, or default under,
individually or in the aggregate would not have a Material Adverse Effect
on the Company. Except as disclosed in the SEC Reports, the Company and
its subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity,
except for possible noncompliance which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company.
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Agreement and Plan of Merger
<PAGE> 20
(o) CONTRACTS; DEBT INSTRUMENTS. (i) Neither the Company nor any of
its subsidiaries is in violation of or in default under (nor does there
exist any condition which upon the passage of time, the giving of notice
or both would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any
of its properties or assets is bound, except for violations or defaults
that individually or in the aggregate would not reasonably be expected to
have a Material Adverse Effect on the Company.
(ii) The Company has made available to Parent (x) true and correct
copies of all loan or credit agreements, notes, bonds, mortgages,
indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its subsidiaries in an aggregate
principal amount in excess of $100,000 is outstanding or may be incurred
and (y) accurate information regarding the respective principal amounts
currently outstanding thereunder. For purposes of this Agreement,
"indebtedness" shall mean, with respect to any Person, without
duplication, (A) all obligations of such Person for borrowed money, or
with respect to deposits or advances of any kind to such Person, (B) all
obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (C) all obligations of such Person under conditional
sale or other title retention agreements relating to property purchased
by such Person, (D) all obligations of such Person (excluding obligations
of such Person pursuant to written purchase orders in the ordinary course
of business and in customary amounts consistent with past practices), (E)
all capitalized lease obligations of such Person, (F) all obligations of
others secured by any Lien on property or assets owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed,
(G) all obligations of such Person under interest rate or currency hedging
transactions (valued at the termination value thereof), (H) all letters of
credit issued for the account of such Person and (I) all guarantees and
arrangements having the economic effect of a guarantee of such Person of
any indebtedness of any other Person.
(p) TAXES AND TAX RETURNS. Except as set forth in the SEC Reports or
on the Disclosure Schedule: (i) all material tax returns, declarations,
reports, estimates, information returns and statements required to be
filed with respect to Taxes (as defined herein) under Federal, state,
local or foreign laws ("Returns") by or with respect to the Company or any
subsidiary of the Company have been timely filed (taking into account any
extensions of time for filing such Returns); (ii) at the time filed, such
Returns were (and, as to Returns not filed as of the date hereof, will be)
true, correct and complete in all material respects; (iii) each of the
Company and each subsidiary of the Company has timely paid or made
provision in accordance with
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Agreement and Plan of Merger
<PAGE> 21
generally accepted accounting principles (or there has been paid or
provision has been made on its behalf) for all material Taxes for all
periods or portions thereof through the date hereof; (iv) there are no
material liens for Taxes upon the assets of the Company or any subsidiary
of the Company which are not provided for in the most recent financial
statements included in the SEC Reports, except liens for Taxes not yet
due; (v) there are no material outstanding deficiencies for any Taxes
proposed, asserted or assessed against the Company or any subsidiary of
the Company which are not provided for in the most recent financial
statements included in the SEC Reports; (vi) there are no material
Federal, state, local or foreign audits or other administrative
proceedings or judicial proceedings presently pending with regard to any
Taxes or Returns required to be filed by or with respect to the Company or
any of its subsidiaries; (vii) the Company has filed a consolidated Return
for Federal income tax purposes on behalf of itself and all of its
domestic subsidiaries as the common parent corporation of an "affiliated
group" (within the meaning of Section 1504(a) of the Code) of which such
subsidiaries are "includible corporations" in such affiliated group within
the meaning of Section 1504(b) of the Code; (viii) the Internal Revenue
Service has completed examinations of the Federal income tax returns filed
by or with respect to the Company (or the statute of limitations for the
assessment of Federal income taxes for such period has expired) for all
periods through and including the Company's taxable year ended June 30,
1994; (ix) none of the Company or any of its subsidiaries has been a
member of an "affiliated group" (as defined above), or any similar
affiliated, combined or consolidated group for state, local or foreign tax
purposes (other than a group the common parent of which is the Company),
or has any liability for the Taxes of any person (other than the Company
or its current subsidiaries) under Treasury Regulation Section 1.1502-6 or
any similar provision of state, local or foreign law or as a transferee,
successor, by contract or otherwise; (x) except as set forth in the
Disclosure Schedule, neither the Company nor any of its subsidiaries is a
party to any material tax sharing, tax indemnity or other agreement or
arrangement with respect to Taxes with any entity not included in the
Company's most recent financial statements included in the SEC Reports;
(xi) neither the Company nor any of its subsidiaries has agreed or is
required to make any adjustment under Section 481 of the Code; (xii) the
Company has not been (and will not be) a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the five (5) year period ending at the Effective Time and (xiii)
none of the Company or any of its subsidiaries has filed a consent under
Section 341(f) of the Code. For purposes of this Agreement, "Taxes" means
all income, gross income, gross receipts, premium, sales, use, transfer,
franchise, profits, withholding, payroll, employment, excise, severance,
property and windfall profits taxes, and all other taxes, assessments or
similar charges of any kind whatsoever thereon or applicable thereto,
together with any interest and any penalties, additions to tax or
additional amounts, in each case imposed by any taxing authority (domestic
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Agreement and Plan of Merger
<PAGE> 22
or foreign) upon the Company or any subsidiary of the Company, including,
without limitation, all amounts imposed as a result of being a member of
any affiliated or combined group.
(q) LABOR MATTERS. Except as set forth on the Disclosure Schedule,
neither the Company nor any of its subsidiaries is the subject of any
suit, action or proceeding which is pending or, to the knowledge of the
Company, threatened, asserting that the Company or any of its subsidiaries
has committed an unfair labor practice (within the meaning of the National
Labor Relations Act or applicable state statutes) or seeking to compel the
Company or any of its subsidiaries to bargain with any labor organization
as to wages and conditions of employment, in any such case, that would
reasonably be expected to have a Material Adverse Effect on the Company.
Except as set forth on the Disclosure Schedule, no strike or other labor
dispute involving the Company or any of its subsidiaries is pending or, to
the knowledge of the Company, threatened, and, to the knowledge of the
Company, there is no activity involving any employees of the company or
any of its subsidiaries seeking to certify a collective bargaining unit or
engaging in any other organizational activity, except for any such dispute
or activity which would not reasonably be expected to have a Material
Adverse Effect on the Company.
(r) ENVIRONMENTAL MATTERS. (i) Except as set forth on the Disclosure
Schedule or in the SEC Reports, the Company's and each of its
subsidiaries' operation and use of its respective assets, including its
owned and leased real property, are in compliance in all respects with all
applicable Laws relating to the protection of human health or the
environment ("Environmental Laws"), except to the extent that any such
noncompliance would not have a Material Adverse Effect on the Company. The
Company and each of its subsidiaries has obtained all environmental,
health and safety permits necessary for the operation of its respective
business as presently conducted, and all such permits are in full force
and effect and the Company and each of its subsidiaries is in compliance
in all respects with the terms and conditions of each such permit, except,
in each case, to the extent that any failure to obtain a permit or any
such noncompliance would not have a Material Adverse Effect on the
Company. Except as set forth on the Disclosure Schedule, neither the
Company nor any of its subsidiaries has received any notice of, nor is
there, any administrative or judicial investigation, proceeding or action
with respect to any material violation, alleged or proven, of
Environmental Laws by the Company or any its subsidiaries or otherwise
involving their respective owned or leased real property.
(ii) Except as set forth on the Disclosure Schedule, neither the
Company nor any of its subsidiaries has taken or failed to take any action
that has resulted in or will result in any liability or obligation of the
Company relating to (x) the environmental
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Agreement and Plan of Merger
<PAGE> 23
conditions on, under, or about the assets of the Company or any of its
subsidiaries or any of their respective owned or leased real property, or
any properties owned, leased, operated or used by the Company or any of
its subsidiaries or any predecessor of the Company or any of its
subsidiaries at the present time or in the past, including, without
limitation, the air, soil and groundwater conditions at such properties or
(y) the past or present use, management, handling, transport, treatment,
generation, storage, disposal or release of any Hazardous Substances (as
defined below), except in the case of clauses (x) and (y) above, to the
extent such liability or obligation would not have a Material Adverse
Effect on the Company.
(iii) As used herein, the term "Hazardous Substance" means
asbestos-containing material and any and all hazardous or toxic
substances, materials or wastes as defined or listed under the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the
Comprehensive Environmental Response, Compensation and Liability Act or
any comparable state statute or any regulation promulgated under any of
such federal or state statutes.
(s) OPINION OF THE COMPANY'S FINANCIAL ADVISOR. The Board of
Directors of the Company has received a written opinion from McDonald
Investments, Inc. to the effect that, as of the date of this Agreement,
the consideration to be received in the Offer and the Merger by the
holders of Shares (other than Parent and its affiliates) is fair from a
financial point of view to such holders of Shares.
4. COVENANTS
---------
4.1 ACQUISITION TRANSACTIONS. (a) After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall not, shall not permit any of its
subsidiaries to, and shall not authorize or permit any officer, director or
employee or any investment banker, attorney, accountant or other advisor or
representative of the Company or any of its subsidiaries to, directly or
indirectly, except as otherwise expressly permitted in this Section 4.1(a) or
in Section 4.1(b), (i) initiate, solicit, negotiate, encourage, or provide
confidential information to facilitate any proposal or offer to acquire all or
any substantial part of the business and properties of the Company and its
subsidiaries, taken as a whole, or beneficial ownership (as determined pursuant
to Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the capital
stock of the Company, whether by merger, purchase of assets, tender offer or
otherwise, whether for cash, securities or any other consideration or
combination thereof (such transactions being referred to herein as "Acquisition
Transactions"), (ii) enter into any agreement with respect to any Acquisition
Transaction or give any approval of the type referred to in Section 4.1(b) with
respect to
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Agreement and Plan of Merger
<PAGE> 24
any Acquisition Transaction or (iii) participate in any discussions regarding,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
Acquisition Transaction. Notwithstanding the immediately preceding sentence, the
Company and its subsidiaries may, prior to the Company Stockholder Approval (as
defined in Section 4.7), in response to any unsolicited proposal for an
Acquisition Transaction, furnish information concerning its business, properties
or assets to the corporation, partnership, person or other entity or group (a
"Potential Acquiror") making such proposal for an Acquisition Transaction and
participate in negotiations with the Potential Acquiror if (x) the Company's
Board of Directors, after consultation with one or more of its independent
financial advisors, is of the reasonable belief that such Potential Acquiror has
the financial wherewithal to consummate such an Acquisition Transaction, (y) the
Company's Board of Directors reasonably determines, after receiving advice from
the Company's financial advisor, that such Potential Acquiror has submitted a
proposal for an Acquisition Transaction that involves consideration to the
Company's stockholders and other terms that taken as a whole are superior to the
Merger and (z) based upon advice of counsel to such effect, the Company's Board
of Directors determines in good faith that it is necessary to so furnish
information and negotiate in order to comply with its fiduciary duty to
stockholders of the Company. In the event the Company shall determine to provide
any information as described above or shall receive any offer of the type
referred to in this Section 4.1 or shall receive or become aware of any other
proposal to acquire a substantial part of the business and properties of the
Company and its subsidiaries, taken as a whole, or to acquire a substantial
amount of capital stock of the Company, it shall promptly inform Parent orally
as to the fact that information is to be provided and shall furnish to Parent
the identity of the recipient of such information and/or the proponent of any
such offer or proposal and a description of the material terms thereof. The
Company will keep Parent fully informed of the status and material details of
any proposed Acquisition Transaction or other transaction (including any
material amendments or material proposed amendments of any such proposed
Acquisition Transaction or other transaction).
(b) Neither the Board of Directors of the Company nor any committee
thereof (x) shall withdraw or modify or propose to withdraw or modify, in any
manner adverse to Parent, the approval or recommendation of such Board of
Directors or such committee of this Agreement, the Offer or the Merger or (y)
approve or recommend, or propose to approve or recommend, any proposal for an
Acquisition Transaction except, in each case, in connection with a Superior
Proposal. As used herein, the term "Superior Proposal" means a bona fide
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the Shares then outstanding or all or
substantially all of the assets of the Company, PROVIDED (i) such proposed
transaction satisfies the tests set forth in clauses (x), (y) and (z) of the
second sentence of Section 4.1(a) and (ii) the Board of Directors determines, in
its good faith reasonable judgment,
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Agreement and Plan of Merger
<PAGE> 25
that such proposed transaction is reasonably likely to be consummated without
undue delay.
(c) Nothing contained in this Section 4.1 shall prohibit the Company
from at any time taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act, provided that
neither the Company nor its Board of Directors shall, except at permitted by
this Section 4.1, approve or recommend acceptance of a proposal for an
Acquisition Transaction.
4.2 INTERIM OPERATIONS. (a) During the period from the date of this
Agreement to the Effective Time, except as contemplated by this Agreement, as
set forth on the Disclosure Schedule, as expressly permitted by Section 4.1 or
as otherwise approved in writing by the Purchaser, the Company shall not and
shall cause its subsidiaries not to:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other
than dividends and distributions by a direct or indirect wholly owned
subsidiary of the Company to its parent, (y) split, combine or
reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or
any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities;
(ii) grant, issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible
securities, except upon exercise of any Option;
(iii) amend its certificate of incorporation, by-laws or other
comparable organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, limited liability
company, partnership, joint venture, association or other business
organization or division thereof or (y) any assets or services of any
kind other than (A) pursuant to written purchase orders issued in the
ordinary course of business and in customary amounts consistent with
past practices or (B) acquisitions of assets or services in the
ordinary course of business and in customary amounts consistent with
past practices that, individually, do not exceed $25,000;
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Agreement and Plan of Merger
<PAGE> 26
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, other than in the ordinary course of business consistent with
past practice, that are material to the Company and its subsidiaries
taken as a whole;
(vi) incur any indebtedness, except for borrowings for working
capital purposes not in excess of recent past practice and current
lending arrangements;
(vii) make or agree to make any new capital expenditure or
capital expenditures which in the aggregate are in excess of
$100,000;
(viii) pay (or commit to pay) any bonus or other incentive
compensation to any officer, director, partner or other employee or
grant (or commit to grant) to any officer, director, partner or
employee any other increase in compensation, except, in the case of
employees who are not executive officers or directors, normal salary
increases consistent with recent practice;
(ix) (i) enter into, adopt or amend (or commit to enter into,
adopt or amend) any employment, retention, change in control,
collective bargaining, deferred compensation, severance, retirement,
bonus, profit-sharing, stock option or other equity, pension or
welfare plan or agreement maintained for the benefit of any officer,
director, partner or employee, except as required by law, or (ii)
except as required by agreements set forth on the Disclosure
Schedule, grant or pay (or commit to grant or pay) any severance or
termination compensation or benefits to any officer, director,
partner or employee;
(x) make any tax election inconsistent with past practices or
settle or compromise any material income tax liability;
(xi) except in the ordinary course of business or except as
would not reasonably be expected to have a Material Adverse Effect on
the Company, modify, amend or terminate any material contract or
agreement to which the Company or any subsidiary is a party or waive,
release or assign any material rights or claims thereunder;
(xii) make any material change to its accounting methods,
principles or practices, except as may be required by generally
accepted accounting principles; or
(xiii) authorize, or commit or agree to take, any of the
foregoing actions.
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Agreement and Plan of Merger
<PAGE> 27
(b) OTHER ACTIONS. Except as expressly permitted by Section 4.1, the
Company shall not, and shall not permit any of its subsidiaries to, take
any action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of the Company set forth in
this Agreement that are qualified as to materiality becoming untrue, (ii)
any of such representations and warranties that are not so qualified
becoming untrue in any material respect or (iii) any of the conditions to
the Merger set forth in Article 5 not being satisfied.
(c) ADVICE OF CHANGES. The Company shall promptly advise Parent and
Parent shall promptly advise the Company orally and in writing of (i) any
representation or warranty made by it (or, in the case of Parent, made by
it or the Purchaser) contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (or, in the
case of Parent, a failure by it or the Purchaser) to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) any change
or event having, or which, insofar as can reasonably be foreseen, would
have, a Material Adverse Effect on such party or on the truth of their
respective representations and warranties or the ability of the conditions
set forth in Article VI to be satisfied, provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
4.3 ACCESS AND INFORMATION. Throughout the period prior to the
Effective Time, so long as this Agreement remains in effect, the Company shall
afford to Parent, the Purchaser and their representatives such access, during
normal business hours, to the Company's and its subsidiaries' books, records
(including, without limitation, tax returns and work papers of the Company's
independent auditors), plant and personnel, and to such other information, as
Parent shall reasonably request. Parent and the Purchaser will treat, and will
cause their respective accountants, counsel and other representatives to treat,
as strictly confidential all non-public documents and non-public information
concerning the Company furnished to Parent or the Purchaser in connection with
the transactions contemplated by this Agreement, subject to the requirements of
law and the provisions of this Agreement. If the transactions contemplated by
this Agreement are not consummated, such confidence shall be maintained except
to the extent such information can be shown to have been (i) in the public
domain through no fault of Parent or the Purchaser or (ii) later lawfully
acquired by Parent or the Purchaser from other sources without any breach of
duty to the Company by Parent, the Purchaser or, to the knowledge of Parent or
the Purchaser, any third party. If requested by the Company, Parent and the
Purchaser will destroy all copies of written information furnished by the
Company to Parent or the Purchaser or its agents, representatives or advisors.
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Agreement and Plan of Merger
<PAGE> 28
4.4 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Parent, the Purchaser
and the Company shall use their reasonable best efforts to make promptly any
required submissions under the HSR Act, the Exchange Act and Section 1707.041 of
the Ohio Revised Code with respect to the Offer, the Merger and the transactions
contemplated by this Agreement. The Company shall use its reasonable best
efforts to obtain all consents, approvals, permits or authorizations as are
required to be obtained from other parties to loan agreements or other contracts
material to the Company's business in connection with the consummation of the
Merger, including, without limitation, those filings and consents identified on
Schedule 4.4 to the Disclosure Schedule.
4.5 REASONABLE BEST EFFORTS. (a) Subject to the terms and conditions
provided in this Agreement, each of the parties agrees to use its reasonable
best efforts to take promptly, or cause to be taken, all actions and to do
promptly, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable best efforts (i) to obtain all necessary waivers,
consents and approvals, and (ii) to effect all necessary registrations and
filings, subject, however, to Company Stockholder Approval (as defined in
Section 4.6 hereof). In case at any time after the Effective Time any further
action is necessary or desirable to carry out the obligations of the parties
under this Agreement, the proper officers and/or directors of Parent, the
Purchaser and the Company, as the case may be, shall take the necessary action.
(b) In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (i) take all action necessary to ensure
that no state takeover statute or similar statute or regulation, in each case as
the same is in effect on the date hereof, is or becomes applicable to the Offer,
the Merger, this Agreement, the Stockholders Agreement or any of the other
transactions contemplated by this Agreement or the Stockholders Agreement and
(ii) if any such state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger, this Agreement, the Stockholders Agreement
or any other transaction contemplated by this Agreement or the Stockholders
Agreement take all action necessary to ensure that the Merger and the other
transactions contemplated by this Agreement and the Stockholders Agreement may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and the Stockholders Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions contemplated
by this Agreement and the Stockholders Agreement.
4.6 PUBLIC STATEMENTS. So long as this Agreement remains in effect,
Parent and the Purchaser, on the one hand, and the Company, on the other hand,
will consult with each other before issuing, and provide each other the
opportunity to review, comment upon and consent in writing prior to the issuance
of, any press release or other public
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Agreement and Plan of Merger
<PAGE> 29
statements with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
4.7 STOCKHOLDER APPROVAL. (a) If required by applicable law in order
to consummate the Merger, as soon as practicable following the purchase of the
Shares pursuant to the Offer, the Company shall duly call, give notice of,
convene and hold a meeting of its stockholders (the "Company Stockholders
Meeting") for the purpose of adopting and approving this Agreement and the
transactions contemplated hereby (the "Company Stockholder Approval"). Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 4.7(a) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any proposed Acquisition Transaction. The
Company will, through its Board of Directors, recommend to its stockholders the
approval and adoption of this Agreement and the transactions contemplated
hereby, except to the extent that the Board of Directors of the Company shall
have withdrawn or modified its approval or recommendation of this Agreement or
the Merger and terminated this Agreement in accordance with Section 4.1(b). At
such meeting, the Parent and the Purchaser will each vote, or cause to be voted,
all Shares acquired in the Offer or otherwise beneficially owned by it or any of
its subsidiaries on the record date for such meeting, in favor of the approval
and adoption of this Agreement and the transactions contemplated hereby.
(b) The Company shall, if required by law, prepare and file a proxy
statement (the "Proxy Statement") with the Commission in connection with
obtaining the Company Stockholder Approval. Parent and the Purchaser shall
cooperate with the Company in the preparation of the Proxy Statement including,
without limitation, promptly providing information requested by the Company or
required by the Commission to be included in the Proxy Statement and responding
promptly to any inquiries from the Company made in connection with comments on
the Proxy Statement received from the Commission. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the Commission completes
its review of the Proxy Statement.
(c) The Company agrees that none of the information included or
incorporated by reference in the Proxy Statement or otherwise supplied by the
Company to its stockholders, including any amendments to any of the foregoing,
will be false or misleading with respect to any 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 under which they are
made, not misleading; PROVIDED, that the foregoing shall not
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Agreement and Plan of Merger
<PAGE> 30
apply to information supplied by or on behalf of Parent or the Purchaser
specifically for inclusion or incorporation by reference in any such document.
Parent agrees that none of the information supplied by or on behalf of Parent or
the Purchaser specifically for inclusion or incorporation by reference in any
such document will be false or misleading with respect to any material fact or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements in such information, in light of the
circumstances under which they are made, not misleading.
(d) Notwithstanding the foregoing, in the event that the Purchaser
shall acquire at least 90 percent of the outstanding Shares, the parties hereto
agree, at the request of the Parent or the Purchaser, to take all necessary and
appropriate action to cause the Merger to become effective, as soon as
practicable after the expiration of the Offer, without a meeting of stockholders
of the Company in accordance with Section 253 of the DGCL.
4.8 STOCKHOLDER LITIGATION. The Company shall give the Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that the Parent shall have
the right to prevent the Company from entering into any such settlement without
the Parent's consent if the Parent agrees to indemnify each director of the
Company for the amount of his or her individual liability (whether as a director
or in any other capacity), if any, arising from the underlying claim, net of any
insurance proceeds received by such director, that is in excess of the amount
that such director would have been liable for under such settlement (whether as
a director or in another capacity).
4.9 INDEMNIFICATION, EXCULPATION AND INSURANCE. Parent and the
Purchaser agree that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors, officers, employees or
agents of the Company and its subsidiaries or any Person who is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, as
provided in their respective certificates of incorporation, by-laws (or
comparable organizational documents) and indemnification agreements shall
survive the Merger and shall continue in full force and effect in accordance
with their terms. Parent will cause to be maintained for a period of not less
than six (6) years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time ("D&O Insurance") for
all persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium therefor would not be in excess of 250%
of the last annual premium paid prior to the date of this Agreement (the
"Maximum Premium"); PROVIDED, HOWEVER, that if the annual premium therefor would
exceed the
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Agreement and Plan of Merger
<PAGE> 31
Maximum Premium, Parent shall purchase as much coverage as is available for the
Maximum Premium; PROVIDED, further, that Parent may, in lieu of maintaining such
existing D&O Insurance as provided above, cause coverage to be provided under
any policy maintained for the benefit of Parent or any of its subsidiaries or
any policy specifically obtained for this purpose, so long as the terms thereof
are no less advantageous to the intended beneficiaries thereof than the existing
D&O Insurance for a period of not less than six (6) years from the Effective
Time. If the existing D&O Insurance expires, is terminated or canceled during
such six (6) year period, Parent will obtain as much D&O Insurance as can be
obtained for the remainder of such period for an annualized premium equal to the
Maximum Premium, on terms and conditions no less advantageous to the covered
persons than the existing D&O Insurance.
4.10 BORROWINGS UNDER THE LOAN AGREEMENT. The Company shall manage
its obligations under its loan agreement with Comerica Bank to insure that
neither the Company, the Parent nor the Purchaser shall incur any breakage or
similar prepayment costs in the event the Company prepays its outstanding
indebtedness thereunder in the event of a change of control of the Company.
Except as set forth on the Disclosure Schedule, neither the Company, the Parent
nor the Purchaser shall incur any breakage or similar prepayment costs in the
event the Company prepays any outstanding indebtedness for borrowed money in the
event of a change of control of the Company.
5. CONDITIONS
----------
5.1 CONDITIONS TO THE OBLIGATIONS OF PARENT, THE PURCHASER AND THE
COMPANY. The obligations of Parent, the Purchaser and the Company to consummate
the Merger are subject to the satisfaction, at or before the Effective Time, of
each of the following conditions:
(a) The Purchaser shall have purchased all Shares duly tendered and
not withdrawn pursuant to the terms of the Offer and subject to the terms
thereof; PROVIDED that the obligation of the Parent and the Purchaser to
effect the Merger shall not be conditioned on the fulfillment of the
condition set forth in this Section 5.1 (a) if the failure of the
Purchaser to purchase the Shares pursuant to the Offer shall have
constituted a breach of the Offer or of this Agreement.
(b) The consummation of the Merger shall not be precluded by any
order, decree or injunction of a court of competent jurisdiction (each
party agreeing to use its best efforts to have any such order reversed or
injunction lifted), and there shall not have been any action taken or any
Law enacted, promulgated or deemed
28
Agreement and Plan of Merger
<PAGE> 32
applicable to the Merger by any Governmental Entity that makes
consummation of the Merger illegal.
(c) If required by the Certificate of Incorporation and By-Laws of
the Company and the DGCL, this Agreement shall have been approved and
adopted by the affirmative vote of the holders of the requisite number of
shares of Common Stock in accordance with the Certificate of Incorporation
and By-Laws of the Company and the DGCL.
(d) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
5.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND THE PURCHASER. The
obligations of Parent and the Purchaser to consummate the Merger are subject to
the satisfaction, at or before the Effective Time, of the following conditions:
(a) The Company shall not have received notice from the holder or
holders of more than 3% of the outstanding Shares, determined on a fully
diluted basis, that such holder or holders have exercised or intend to
exercise its or their appraisal rights under Section 262 of the DGCL.
(b) There shall not be pending or threatened by any Governmental
Entity any suit, action or proceeding (and there shall not be pending by
any other person any suit, action proceeding which has a reasonable
likelihood of success), in each case (i) challenging the acquisition by
Parent or the Purchaser of any shares of capital stock of the Company or
the Surviving Corporation, seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated
by this Agreement or the Stockholders Agreement or seeking to obtain from
the Company, Parent or the Purchaser any damages that are material taken
as a whole or Parent and its subsidiaries taken as a whole, as applicable,
(ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective subsidiaries of any material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or Parent and its subsidiaries, taken as a whole, as
applicable, or to compel the Company, Parent or any of their respective
subsidiaries to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or Parent and its subsidiaries, taken as a whole, as applicable, as a
result of the Merger or any of the other transactions contemplated by this
Agreement or the Stockholders Agreement, (iii) seeking to impose
limitations on the ability of Parent to acquire or hold, or exercise full
rights of ownership of, any shares of capital stock of the Company or the
Surviving Corporation, including the right to vote the Shares, or common
stock of the Surviving Corporation, on all
29
Agreement and Plan of Merger
<PAGE> 33
matters properly presented to the stockholders of the Company or the
Surviving Corporation, respectively, (iv) seeking to prohibit Parent and
its subsidiaries from effectively controlling in any material respect the
business or operations of the Company and its subsidiaries, taken as a
whole, or (v) which otherwise could reasonably be expected to have a
Material Adverse Effect on the Company or Parent. In addition, there shall
not be any statute, rule, regulation, judgment or order enacted, entered,
enforced or promulgated that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (ii) through
(iv) above.
6. MISCELLANEOUS
-------------
6.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether prior to or after approval by the stockholders of the Company:
(a) by the mutual written consent of Parent, the Purchaser and the
Company;
(b) by either the Parent or the Company if, on or before April 7,
1999 and without fault of such terminating party, the Purchaser shall not
have purchased in the Offer such number of the Shares which represent in
excess of 50% of the outstanding Shares on a fully diluted basis, or the
Merger shall not have been consummated on or before July 6, 1999,
PROVIDED, HOWEVER, that the right to terminate this Agreement shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Offer
or the Merger to have occurred on or before the aforesaid date;
(c) by either the Parent or the Company if the Offer shall expire or
terminate in accordance with its terms without any Shares having been
purchased thereunder and, in the case of termination by Parent, the
Purchaser shall not have been required by the terms of the Offer or this
Agreement to purchase any Shares pursuant to the Offer;
(d) by the Company if the Purchaser shall not timely commence the
Offer as provided in Section 1.1(a);
(e) if a Company Stockholder Approval is required by law, by either
the Purchaser or the Company if, upon a vote at a duly held Company
Stockholders Meeting or any adjournment thereof at which such Company
Stockholder Approval shall have been voted upon, such Company Stockholder
Approval shall not have been obtained;
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Agreement and Plan of Merger
<PAGE> 34
(f) unilaterally by the Purchaser or the Company (i) if the other
fails to perform any material covenant or agreement in any material
respect in this Agreement, and does not cure the failure in all material
respects within 30 business days after the terminating party delivers
written notice of the alleged failure or (ii) if any condition to the
obligations of that party is not satisfied (other than by reason of a
breach by that party of its obligations hereunder), and it reasonably
appears that the condition cannot be satisfied prior to July 6, 1999;
(g) by either the Purchaser or the Company if either is prohibited by
an order or injunction (other than an order or injunction on a temporary
or preliminary basis) of a court of competent jurisdiction or other
Governmental Entity from consummating the Offer or the Merger and all
means of appeal and all appeals from such order or injunction have been
finally exhausted;
(h) by the Purchaser if the Board of Directors of the Company shall
have withdrawn or modified, or resolved to withdraw or modify, in any
manner which is adverse to Parent or the Purchaser, its recommendation or
approval of the Offer, the Merger or this Agreement; PROVIDED, HOWEVER,
that a termination pursuant to this Section shall not become effective if,
as a result of the Company's receipt of a proposal for an Acquisition
Transaction from a third party, the Company, in accordance with Section
4.1(b), withdraws or modifies, or resolves to withdraw or modify, in any
manner which is adverse to Parent or the Purchaser, its recommendation or
approval of the Offer, the Merger or this Agreement and if within ten (10)
business days of taking and disclosing to its stockholders the
aforementioned position the Company publicly reconfirms its recommendation
of the transactions contemplated hereby; or
(i) by the Company if (i) the Board of Directors of the Company shall
have determined in good faith, based on the advice of outside counsel,
that it is necessary, in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, to terminate this Agreement
to enter into an agreement with respect to or to consummate a transaction
constituting a Superior Proposal, (ii) the Company shall have given notice
to the Purchaser advising the Purchaser that the Company has received a
Superior Proposal from a third party, specifying the material terms and
conditions (including the identity of the third party), and that the
Company intends to terminate this Agreement in accordance with this
Section 6.1(i), (iii) either (A) the Purchaser shall not have revised its
proposal for an Acquisition Transaction within two (2) business days from
the time on which such notice is deemed to have been given to Parent or
(B) if the Purchaser within such period shall have revised its proposal
for an Acquisition Transaction, the Board of Directors of the Company,
after receiving advice from the Company's financial advisor, shall have
determined in
31
Agreement and Plan of Merger
<PAGE> 35
its good faith reasonable judgment that the third party's proposal for an
Acquisition Transaction is superior to Parent's revised proposal for an
Acquisition Transaction, and (iv) the Company, at the time of such
termination, pays the Expenses and the Termination Fee in accordance with
Section 6.12.
In the event of a termination of this Agreement and an abandonment of the
Merger, no party hereto (or any of its directors, officers, representatives or
agents) shall have any further liability or further obligation to any other
party to this Agreement, except with respect to the provisions of this Article 6
and the other provisions that survive the Merger pursuant to Section 6.2 and
except that nothing herein will relieve any party from liability for any willful
breach of its representations, warranties, covenants and agreements set forth in
this Agreement.
6.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise provided in this Section 6.2, none of the representations or
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time or, in the case of the Company, shall
survive the acceptance for payment of, and payment for, any Shares by the
Purchaser pursuant to the Offer.
6.3 AMENDMENT AND WAIVER. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto and in
compliance with applicable law. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained herein; PROVIDED, HOWEVER, that no such
waiver may materially adversely affect the rights of the stockholders of the
Company. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
6.4 ENTIRE AGREEMENT. This Agreement and the Stockholders Agreement
dated as of the date hereof among Parent and certain stockholders of the Company
contain the entire agreement among Parent, the Purchaser and the Company with
respect to the Merger and the other transactions contemplated hereby and
thereby, and such agreements supersede all prior agreements among the parties
with respect to these matters.
6.5 DEFINITION. As used herein, the term "Person" means any
individual, corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
32
Agreement and Plan of Merger
<PAGE> 36
6.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF.
6.7 HEADINGS. The descriptive headings contained in this Agreement
are for convenience and reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.8 NOTICES. Each party shall promptly give written notice to the
other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event which would cause or constitute
a breach of any of its representations, warranties or covenants contained or
referenced in this Agreement and will use its best efforts to prevent or
promptly remedy the same. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile, telex or
other standard form of telecommunications, by courier service, or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to the Company:
Defiance, Inc.
1111 Chester Avenue
Suite 750
Cleveland, Ohio 44114
Fax: (216) 861-6006
Attn: Michael J. Meier
With a copy to:
Arter & Hadden LLP
1100 Huntington Buildings
925 Euclid Avenue
Cleveland, Ohio 44115
Fax: (216) 696-2645
Attn: Robert Tomaro, Esq.
33
Agreement and Plan of Merger
<PAGE> 37
If to Parent or the Purchaser, to it:
c/o The General Chemical Group Inc.
Liberty Lane
Hampton, NH 03842
Fax: (603) 929-2703
Attention: Secretary
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Attn: Ralph Arditi, Esq.
or to such other address or facsimile number as any party may have furnished to
the other parties in writing in accordance with this Section 6.8.
6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one agreement.
6.10 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
6.11 PARTIES IN INTEREST; ASSIGNMENT. This Agreement is binding upon
and is solely for the benefit of the parties hereto and their respective
successors, legal representatives and assigns, except that Section 4.9 is
intended to be for the benefit of the parties referred to therein, and may be
enforced by such parties. The Purchaser shall have the right (a) to assign to
Parent or any direct or indirect wholly-owned subsidiary of Parent any and all
rights and obligations of the Purchaser under this Agreement, including, without
limitation, the right to substitute in its place such a subsidiary as one of the
constituent corporations in the Merger (such subsidiary assuming all of the
obligations of the Purchaser in connection with the Merger) and may require
subsidiaries of the Company to merge with subsidiaries of the Purchaser (or its
assignees) in connection with
34
Agreement and Plan of Merger
<PAGE> 38
the Merger and (b) to restructure the transaction to provide for the merger of
the Company with and into the Purchaser or such other entity as provided above;
PROVIDED, HOWEVER, that the Company shall not be deemed to have breached any of
its representations and warranties herein by reason of the Purchaser exercising
its rights hereunder, and by exercising such rights Parent will be deemed to
have waived the receipt of any additional consents of third parties required by
virtue thereof; and PROVIDED FURTHER that no such assignment shall affect any
obligation of Parent or Purchaser hereunder and that it shall remain primarily
liable as to its assigned obligations. If the Purchaser exercises its right to
so restructure the transaction, the Company shall promptly enter into
appropriate agreements to reflect such restructuring.
6.12 FEES AND EXPENSES. (a) Except as provided below in this Section
6.12, all fees and expenses incurred in connection with the Offer, the Merger,
this Agreement, the Stockholders Agreement and the transactions contemplated by
this Agreement and the Stockholders Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent the sum of (x) Parent's Expenses (as defined below) and (y) $1,750,000
(the "Termination Fee") upon demand if the Company terminates this Agreement
pursuant to Section 6.1(i). In addition, the Company shall pay or cause to be
paid, in same day funds to Parent the sum of Parent's Expenses and the
Termination Fee if (i) the Purchaser terminates this Agreement pursuant to
Section 6.1(f) or 6.1(h) at any time after a proposal for an Acquisition
Transaction has been made or (ii) the Company or the Purchaser terminates this
Agreement pursuant to Section 6.1(b), 6.1(c) or 6.1(e) at any time after a
proposal for an Acquisition Transaction has been made and, within twelve (12)
months after any termination referred to in the immediately preceding clauses
(i) or (ii) of this sentence, any Person that made a proposal for an Acquisition
Transaction (or an affiliate thereof) completes a merger, consolidation or other
business combination with the Company or a subsidiary of the Company, or the
purchase from the Company or from a subsidiary of the Company of 30% or more (in
voting power) of the voting securities of the Company or of 30% or more (in
market value) of the assets of the Company and its subsidiaries, on a
consolidated basis; PROVIDED that the Company will not have any obligations
under this Section 6.12(b) if the Purchaser terminates this Agreement pursuant
to Section 6.1(f)(ii) as a result of the failure of a condition to be satisfied
unless the reason for the failure of such condition to be satisfied is
reasonably related to the making of such proposal for an Acquisition Transaction
by the Person that ultimately consummated a transaction with the Company.
"Expenses" shall mean reasonable and reasonably documented out-of-pocket fees
and expenses incurred or paid by or on behalf of Parent in connection with the
Offer and Merger or the
35
Agreement and Plan of Merger
<PAGE> 39
consummation of any of the transactions contemplated by this Agreement
(including, without limitation, fees and expenses of counsel, commercial banks,
investment banking firms, accountants, experts and consultants to Parent and any
of its affiliates), PROVIDED that all such Expenses for this purpose shall not
exceed $1,000,000 in the aggregate.
6.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
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Agreement and Plan of Merger
<PAGE> 40
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date set forth above.
DEFIANCE, INC.
By: /s/ Jerry A. Cooper
----------------------------------------------
Name: Jerry A. Cooper
Title: President and Chief Executive Officer
NEW HAMPSHIRE OAK, INC.
By: /s/ Michael R. Herman
----------------------------------------------
Name: Michael R. Herman
Title: Vice President
DN ACQUISITION CORPORATION
By: /s/ Michael R. Herman
----------------------------------------------
Name: Michael R. Herman
Title: Vice President
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Agreement and Plan of Merger
<PAGE> 41
ANNEX A
-------
CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision
of the Offer, the Purchaser shall not be required to accept for payment, or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to
pay for or return tendered shares after the termination or withdrawal of the
Offer), to pay for any Shares tendered pursuant to the Offer, and (subject to
the terms of the Agreement) may amend or terminate the Offer or postpone the
acceptance for payment, the purchase of, and/or (subject to any such applicable
rules and regulations of the Commission) payment for, Shares tendered, (i)
unless there are validly tendered and not properly withdrawn prior to the
expiration of the Offer that number of Shares which represents in excess of 50%
of the outstanding Shares on a fully-diluted basis (such basis assumes all
shares underlying vested and unvested stock options are issued and outstanding),
or (ii) if at any time on or after the date of the Agreement and at or before
the time of payment for any such Shares (whether or not any Shares shall
theretofore have been accepted for payment or paid pursuant to the Offer) any of
the following conditions exists:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding
before any federal or state court or governmental, administrative or
regulatory authority or agency, located or having jurisdiction within the
United States or any country or economic region in which either the
Company or Parent, directly or indirectly, has material assets or
operations, or any other action taken, proposed or threatened, or statute,
rule, regulation, legislation, interpretation, judgment or order proposed,
sought, enacted, entered, promulgated, amended or issued that is
applicable to Purchaser, the Company or any subsidiary or affiliate of
Purchaser or the Company or the Offer or the Merger, by any legislative
body, court, government or governmental, administrative or regulatory
authority or agency located or having jurisdiction within the United
States or any country or economic region in which either the Company or
Parent, directly or indirectly, has material assets or operations, which
could reasonably be expected to have the effect of: (i) making illegal, or
otherwise restraining or prohibiting or making materially more costly, the
making of the Offer, the acceptance for payment of, payment for, or
ownership, directly or indirectly, of some of or all the Shares by Parent
or Purchaser, the consummation of any of the transactions contemplated by
the Agreement or materially delaying the Merger; (ii) prohibiting or
materially limiting the ownership or operation by the Company or any of
its subsidiaries, or by Parent, Purchaser or any of Parent's subsidiaries
of all or any material portion of the business or assets of the Company
and its subsidiaries taken as a whole or Parent or any of its
subsidiaries, or compelling Purchaser, Parent or any of Parent's
subsidiaries to dispose
Agreement and Plan of Merger
<PAGE> 42
of or hold separate all or any material portion of the business or assets
of the Company and any of its subsidiaries taken as a whole or Parent or
any of its subsidiaries, in each case as a result of the transactions
contemplated by the Offer or the Agreement; (iii) imposing or confirming
material limitations on the ability of Purchaser, Parent or any of
Parent's subsidiaries effectively to acquire or hold or to exercise full
rights of ownership of Shares including, without limitation, the right to
vote any Shares acquired or owned by Parent or Purchaser or any of
Parent's subsidiaries on all matters properly presented to the
shareholders of the Company, including, without limitation, the adoption
and approval of the Agreement and the Merger or the right to vote any
shares of capital stock of any subsidiary directly or indirectly owned by
the Company; (iv) requiring divestiture by Parent or Purchaser, directly
or indirectly, of any Shares; or (v) which could reasonably be expected to
materially adversely affect the business, financial condition or results
of operations of the Company and its subsidiaries taken as a whole or the
value of the Shares or of the Offer to Purchaser or Parent;
(b) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
decline of at least 25% in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 index from that existing at the close
of business on the date hereof, (iii) any material adverse change or any
condition, event or development involving a prospective material adverse
change in United States or other material international currency exchange
rates or a suspension of, or limitation on, the markets therefor, (iv) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (v) any limitation (whether or not
mandatory) by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, on, or any other event that
materially adversely affects, the extension of credit by banks or other
lending institutions, (vi) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving
the United States which would reasonably be expected to have a Material
Adverse Effect on the Company or materially adversely affect (or
materially delay) the consummation of the Offer or (vii) in the case of
any of the foregoing existing at the time of the execution of the
Agreement, a material acceleration or worsening thereof which acceleration
or worsening is reasonably expected to have a Material Adverse Effect on
the Company or to materially adversely affect the consummation of the
Offer;
(c) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes
of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the
Agreement and Plan of Merger
<PAGE> 43
outstanding Shares has been acquired by any corporation (including the
Company or any of its subsidiaries or affiliates), partnership, person or
other entity or group (as defined in Section 13(d)(3) of the Exchange
Act), other than Parent or any of its affiliates, or (ii) (A) the Board of
Directors of the Company or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent or Purchaser the approval or
recommendation of the Offer, the Merger or the Agreement and, within ten
business days of taking and disclosing to its stockholders the
aforementioned position, shall not have publicly reconfirmed its
recommendation of the Offer, the Merger or the Agreement, or approved or
recommended any takeover proposal or any other acquisition of Shares other
than the Offer and the Merger, (B) any corporation, partnership, person or
other entity or group shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer or
exchange offer for any Shares or a merger, consolidation or other business
combination with or involving the Company or any of its subsidiaries or
(C) the Board of Directors of the Company or any committee thereof shall
have resolved to do any of the foregoing;
(d) any of the representations and warranties of the Company set
forth in the Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in
each case as if such representations and warranties were made at the time
of such determination, except with respect to representations and
warranties made as of an earlier time;
(e) the Company shall have failed to perform any material obligation
or to comply with any material agreement or material covenant of the
Company to be performed or complied with by it under the Agreement;
(f) the Agreement shall have been terminated in accordance with its
terms or the Offer shall have been terminated with the consent of the
Company; or
(g) any waiting periods under the HSR Act applicable to the purchase
of Shares pursuant to the Offer shall not have expired or been terminated
or any material approval, permit, authorization, consent or waiting period
of any domestic, foreign or supranational governmental, administrative or
regulatory agency (federal, state, local, provincial or otherwise) located
or having jurisdiction within the United States or any country or economic
region in which either the Company or Parent, directly or indirectly, has
material assets or operations, shall not have been obtained and such
failure to obtain could reasonably be expected to have a Material Adverse
Effect on the Company or the value of the Shares or the Offer to the
Purchaser;
Agreement and Plan of Merger
<PAGE> 44
which, in the good faith sole judgment of Purchaser makes it inadvisable to
proceed with the Offer or with such acceptance for payment of or payment for
Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Purchaser and
may be asserted by Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion (subject to the terms of the
Agreement). The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
Agreement and Plan of Merger
<PAGE> 45
Exhibit A
Jerry A. Cooper
Thomas H. Roulston II
Michael J. Meier
Scott D. Roulston
John D. Ong
George H. Lewis III
James E. Heighway
Richard W. Lock
Clifford Schumacher
James L. Treece
Carl A. Rispoli
Fred Burke
Roger E. Drummer
Michael B. Madden
Michael P. Pavlica
David M. Piacenti
Benjamin A. Scherschel
Janice F. Schneikart
Phillip C. Tomczak
Agreement and Plan of Merger
<PAGE> 1
Exhibit 11(c)(2)
Execution Copy
--------------
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated as of January 7, 1999 (this
"Agreement") among New Hampshire Oak, Inc., a Delaware corporation ("Parent"),
DN Acquisition Corporation, a Delaware corporation ("Purchaser") and the
parties listed on Schedule A attached hereto (each a "Stockholder" and,
collectively, the "Stockholders").
WHEREAS, concurrently herewith Parent, Purchaser, and Defiance,
Inc., a Delaware corporation (the "Company"), are entering into an Agreement
and Plan of Merger of even date herewith (as such agreement may be amended from
time to time, the "Merger Agreement"; capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed to them in the
Merger Agreement) pursuant to which Purchaser will be merged with and into the
Company (the "Merger");
WHEREAS, in furtherance thereof, Parent proposes that Purchaser make
an offer (the "Offer") to purchase for cash all of the issued and outstanding
shares of common stock of the Company at a price of $9.50 per share net to the
seller; and
WHEREAS, Parent has required, as a condition to its entering into
the Merger Agreement and commencing the Offer, that each Stockholder enter
into, and each such Stockholder has agreed to enter into, this Agreement.
NOW, THEREFORE, to satisfy this condition and in consideration of
Parent's entering into the Merger Agreement and causing the Offer to be
commenced, respectively, and in consideration of the premises and the
representations, warranties and covenants contained herein, the parties agree
as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER. Each Stock-
holder hereby severally as to itself represents and warrants to Parent as
follows:
(a) OWNERSHIP OF SHARES AND STOCK OPTIONS. (i) Such
Stockholder is the record holder and beneficial owner of the number
of shares of the common stock of the Company, par value $.05 per
share (the "Common Stock"), set forth opposite such Stockholder's
name on Schedule A hereto (the "Existing Shares", and together with
any shares of Common Stock acquired by such Stockholder after the
date hereof and prior to the termination hereof, whether upon
exercise of options or warrants, conversion of convertible
securities, purchase, exchange or otherwise, the "Shares").
Stockholders Agreement
<PAGE> 2
(ii) On the date hereof, the Existing Shares set forth
opposite such Stockholder's name on Schedule A constitute all of the
shares of Common Stock beneficially owned by such Stockholder.
(iii) Such Stockholder (A) has, with respect to all of
such Stockholder's Existing Shares, and (B) will have at all times
during the term hereof, with respect to all such Stockholder's
Shares, except as set forth on Schedule A, (1) sole power of
disposition; (2) sole voting power; and (3) sole power to demand
dissenter's or appraisal rights, with no restrictions on such
rights, subject to applicable federal securities laws and the terms
of this Agreement.
(iv) Such Stockholder owns validly issued and
outstanding options (the "Stock Options") to acquire the number of
shares of Common Stock set forth opposite such Stockholder's name on
Schedule A hereto (all such shares underlying such Stockholder's
Stock Options being referred to herein collectively as the "Option
Shares"). Except as set forth on Schedule A, all such Stock Options
are fully vested and freely exercisable by such Stockholder to
acquire any and all such Option Shares at any time at his option.
(b) POWER; BINDING AGREEMENT. Such Stockholder has all
requisite legal capacity, power and authority to enter into and
perform all of such Stockholder's obligations under this
Agreement. The execution, delivery and performance of this
Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party or by which such Stockholder
is bound including, without limitation, any voting agreement,
stockholders agreement, voting trust or other agreement. This
Agreement has been duly and validly authorized, executed and
delivered by such Stockholder and constitutes a valid and binding
agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms. There is no beneficiary of or holder
of a voting trust certificate whose consent is required for the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. If such Stockholder is married
and such Stockholder's Shares constitute community property or
otherwise require spousal or other approval for this Agreement to
be legal, valid and binding, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and
binding agreement of, such Stockholder's spouse, enforceable
against such person in accordance with its terms.
(c) NO CONFLICTS. Except for filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and other filings disclosure on the Disclosure
Schedule, if applicable, (i) no filing with, and no permit,
authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement
by such Stockholder
2
Stockholders Agreement
<PAGE> 3
and the consummation by such Stockholder of the transactions
contemplated hereby and (ii) neither the execution and delivery of
this Agreement by such Stock holder nor the consummation by such
Stockholder of the transactions contemplated hereby nor compliance
by such Stockholder with any of the provisions hereof shall (A)
conflict with or result in any breach of the applicable organization
documents applicable to such Stockholder, (B) result in a violation
or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of
termination, cancellation, modification, prepayment 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 of any
kind to which such Stockholder is a party or by which such
Stockholder or any of such Stock holder's properties or assets may
be bound or (C) violate any order, writ, injunction, decree,
judgment, statute, rule, regulation or governmental permit or
license applicable to such Stockholder or any of such Stockholder's
properties or assets.
(d) Such Stockholder's 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, arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising
hereunder.
(e) No broker, investment banker, financial adviser or
other Person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or
on behalf of such Stockholder.
(f) Such Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
2. AGREEMENT TO TENDER. Each Stockholder hereby irrevocably
agrees to duly tender all of the Shares of such Stockholder pursuant to the
terms of the Offer and not to withdraw such Shares prior to the expiration of
the Offer.
3. AGREEMENT TO VOTE; PROXY.
(a) VOTING. Each Stockholder hereby severally as to itself
agrees that, during the time this Agreement is in effect, at any meeting of the
stockholders of the Company, however called, or in connection with any written
consent of the stockholders of the Company, such Stockholder shall vote (or
cause to be voted) the Shares of such
3
Stockholders Agreement
<PAGE> 4
Stockholder (i) 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 hereof and thereof; (ii) against any action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement, the Offer or this Agreement; and (iii) except as specifically
requested in writing by Parent in advance, against the following actions (other
than the Merger and the transactions contemplated by the Merger Agreement): (A)
any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or its subsidiaries; (B) a
sale, lease or transfer of a material amount of assets of the Company or its
subsidiaries or a reorganization, recapitalization, dissolution, liquidation or
winding up of the Company or any of its subsidiaries; (C) any change in the
board of directors of the Company; (D) any change in the present capitalization
of the Company or any amendment of the Company's Certificate of Incorporation;
(E) any other material change in the Company's corporate structure or business;
and (F) any other action which is intended or could reasonably be expected to
impede, interfere with, delay, postpone, discourage or materially adversely
affect the Merger, the transactions contemplated by the Merger Agreement or this
Agreement or the contemplated economic benefits of any of the foregoing. Such
Stockholder shall not enter into any agreement or understanding with any Person
prior to the Termination Date (as defined in Section 9 hereof) to vote in any
manner inconsistent with clause (i), (ii) or (iii) of the preceding sentence.
(b) PROXY. EACH STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS
PURCHASER, PAUL M. MEISTER AND TODD M. DUCHENE IN THEIR RESPECTIVE CAPACITIES
AS OFFICERS OF PURCHASER, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY
SUCH OFFICE OF PURCHASER, AND ANY OTHER DESIGNEE OF PURCHASER, EACH OF THEM
INDIVIDUALLY, SUCH STOCKHOLDER'S IRREVOCABLE (UNTIL THE TERMINATION DATE)
PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE THE SHARES
AS INDICATED IN SECTION 3(a) ABOVE. EACH STOCKHOLDER INTENDS THIS PROXY TO BE
IRREVOCABLE (UNTIL THE TERMINATION DATE) AND COUPLED WITH AN INTEREST AND WILL
TAKE SUCH FURTHER ACTION AND EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE
NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY
PREVIOUSLY GRANTED BY SUCH STOCKHOLDER WITH RESPECT TO SUCH STOCKHOLDER'S
SHARES.
4. CERTAIN COVENANTS OF STOCKHOLDERS. Except in accordance with the
terms of this Agreement, each Stockholder hereby severally as to itself
covenants and agrees as follows:
4
Stockholders Agreement
<PAGE> 5
(a) NO SOLICITATION. Subject to the last sentence of this Section
4(a), such Stockholder shall not, directly or indirectly (including through
advisors, agents or other intermediaries), initiate, solicit, negotiate,
encourage or provide confidential information to facilitate any proposal or
offer by any Person that constitutes or could reasonably be expected to lead to
an Acquisition Transaction. If such Stockholder receives any such inquiry or
proposal, then such Stockholder shall promptly inform Parent of the terms and
conditions, if any, of such inquiry or proposal and the identity of the Person
making it. Subject to the last sentence of this Section 4(a), such Stockholder
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Nothing in this Section 4(a) shall restrict or limit
the ability of any Stockholder who is an officer or director of the Company to
take or perform in such capacity any of the actions or do any of the things
that the Company is permitted to take or perform under Section 4.1(a) or 4.1(b)
of the Merger Agreement.
(b) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE;
RESTRICTION ON WITHDRAWAL. Such Stockholder shall not, directly or indirectly:
(i) except pursuant to the terms of the Merger Agreement, the Offer and this
Agreement, offer for sale, sell, transfer, tender, pledge, hypothecate,
encumber, assign or otherwise dispose of (each such action, a "Disposition"),
enforce or permit the execution of the provisions of any agreement with the
Company whereby the Company may be obligated to repurchase, or enter into any
other contract, option or other arrangement or understanding with respect to,
or otherwise consent to a Disposition of any or all of such Stockholder's
Shares, Stock Options or Option Shares or any interest therein; (ii) except as
contemplated hereby, grant any proxies or powers of attorney, deposit any
Shares, Stock Options or Option Shares into a voting trust or enter into a
voting agreement with respect to any Shares, Stock Options or Option Shares; or
(iii) take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement.
(c) WAIVER OF APPRAISAL AND DISSENTER'S RIGHTS. Such Stockholder
hereby waives any rights of appraisal or rights to dissent from the Merger that
such Stockholder may have.
5. Option. (a) Each Stockholder, severally as to itself and not
jointly, hereby grants to Purchaser an irrevocable option (the "Option") to
purchase (i) such Stockholder's Shares and (ii) all Option Shares underlying
all of such Stockholder's Stock Options, in each case on the terms and subject
to the conditions set forth herein.
(b) The Option may be exercised by Purchaser, as a whole with
respect to all Shares and not in part, at any time and from time to time from
and after any time
5
Stockholders Agreement
<PAGE> 6
when the Merger Agreement is terminated in accordance with its terms, subject to
the conditions set forth in Section 5(f). In addition, the Option may be
exercised by Purchaser, as a whole with respect to all Option Shares and not in
part, at any time and from time to time following the earlier to occur of (i)
Purchaser's purchase of any Shares pursuant to the Offer and (ii) any time when
the Merger Agreement is terminated in accordance with its terms, in each case
subject to the conditions set forth in Section 5(f).
(c) If Purchaser wishes to exercise the Option, Purchaser shall send
a written notice (the "Option Notice") to each Stockholder of its intention to
exercise the Option, specifying the place, and, if then known, the time and the
date (the "Closing Date") of the closing (the "Closing") of the purchase.
(d) At the Closing, each Stockholder shall deliver to Purchaser (or
its designee) certificates evidencing all of such Stockholder's Shares and
Option Shares, as the case may be, required to be delivered pursuant to the
Option Notice by delivery of the Shares and the Option Shares, as the case may
be, duly endorsed to Purchaser or accompanied by stock powers duly executed in
favor of Purchaser, with all necessary stock transfer stamps affixed; it being
understood and agreed that to the extent any Stockholder is required to
exercise his Stock Options in order to deliver the Option Shares to Purchaser,
such Stockholder will exercise such Stock Options in accordance with their
terms.
(e) At the Closing, Purchaser shall pay, and Parent shall cause
Purchaser to pay, to each Stockholder, by wire transfer in immediately
available funds to an account specified by such Stockholder in writing no more
than two days prior to the Closing, an amount equal to the product of the
Merger Consideration and the number of Shares and Option Shares purchased from
such Stockholder pursuant to the exercise of the Option.
(f) The Closing shall be subject to the satisfaction of each of the
following conditions:
(i) no court, arbitrator or governmental body, agency
or official shall have issued any order, decree or ruling and there
shall not be any statute, rule or regulation, restraining,
enjoining or prohibiting the consummation of the purchase and sale
of the Shares or the Option Shares, as the case may be, pursuant to
the exercise of the Option;
(ii) any waiting period applicable to the consummation
of the purchase and sale of the Shares or the Option Shares, as the
case may be, pursuant to the exercise of the Option under the HSR
Act shall have expired or been terminated; and
6
Stockholders Agreement
<PAGE> 7
(iii) all actions by or in respect of, and any filing
with, any governmental body, agency, official, or authority required
to permit the consummation of the purchase and sale of the Shares
pursuant to the exercise of the Option shall have been obtained or
made and shall be in full force and effect.
6. FURTHER ASSURANCES.
(a) From time to time, at any party's request and
without further consideration, each other party 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.
(b) By its execution of this Agreement, (a) each
Stockholder acknowledges that it has been afforded the opportunity to consult
with its legal counsel and financial advisors with respect to its investment
decision to execute this Agreement and (b) each Stockholder acknowledges that
it has been afforded the opportunity to discuss the Merger Agreement with
representatives of Parent. Each Stockholder further acknowledges that it has
otherwise investigated this matter to its full satisfaction and will not seek
rescission or revocation of this Agreement or seek to withdraw or revoke any
vote, irrevocable proxy or irrevocable instruction delivered by it or on its
behalf in connection therewith.
7. OBLIGATIONS ATTACH TO SHARES. Each Stockholder
agrees that this Agreement and the obligations hereunder shall attach to such
Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise.
8. STOP TRANSFER. Each Stockholder agrees with, and
covenants to, Parent that such Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Shares, unless
such transfer is made in compliance with the Offer or this Agreement. Each
Stockholder agrees, with respect to any Shares in certificated form, that such
Stockholder will submit to the Company, within ten business days after the date
hereof, the certificates representing such Shares in order for the Company to
inscribe upon such certificates the following legend: "The shares of Common
Stock, par value $.05 per share, of Defiance, Inc. (the "Company") represented
by this certificate are subject to a Stockholders Agreement dated as of January
7, 1999, and may not be sold or otherwise transferred, except in accordance
therewith. Copies of such Agreement may be obtained at the principal executive
offices of the Company." Each Stockholder agrees that within ten business days
after the date hereof, such Stockholder will no longer hold any Shares, whether
certificated or uncertificated, in "street name" or in the name of any nominee.
7
Stockholders Agreement
<PAGE> 8
9. TERMINATION. This Agreement shall terminate upon
the earlier of (a) the Effective Time, (b) if (i) the Company terminates the
Merger Agreement pursuant to Section 6.1(i) thereof, (ii) the Purchaser
terminates the Merger Agreement pursuant to Section 6.1(f) or 6.1(h) thereof at
any time after a proposal for an Acquisition Transaction has been made or
(iii) the Company or the Purchaser terminates the Merger Agreement pursuant to
Section 6.1(b), 6.1(c) or 6.1(e) thereof at any time after a proposal for an
Acquisition Transaction has been made, twelve (12) months after any such
termination, provided, however, that if the Purchaser has exercised the Option
pursuant to Section 5(c) hereof prior to such date but the Closing has not
occurred prior to such date, this Agreement shall terminate immediately after
the Closing, and (c) if the Merger Agreement is terminated under any
circumstances not mentioned in clause (b) of this Section 9, the date the
Merger Agreement is terminated. The date of termination of this Agreement is
referred to herein as the "Termination Date".
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and (ii) shall not be assigned by operation of law or otherwise without
the prior written consent of (A) in the case of an assignment by a Stockholder,
Parent and (B) in the case of an assignment by Parent or Purchaser, the
Company, provided that Parent may in its sole discretion assign its rights and
obligations hereunder to any of its direct or indirect wholly-owned
subsidiaries.
(b) AMENDMENTS. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed the parties hereto; PROVIDED, HOWEVER, that Schedule
A may be supplemented by Parent without the agreement of any other party, by
adding the name and other relevant information concerning any stockholder of
the Company who agrees to be bound by the terms of this Agreement, and
thereafter such added stockholder shall be treated as a "Stockholder" for all
purposes of this Agreement.
(c) NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, facsimile,
telex or other standard form of telecommunications, by courier service, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed
8
Stockholders Agreement
<PAGE> 9
If to Parent or Purchaser, to it:
c/o The General Chemical Group Inc.
Liberty Lane
Hampton, NH 03842
Facsimile No.: (603) 929-2703
Attention: Secretary
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York New York 10022
Facsimile No.: (212) 909-6836
Attention: Ralph Arditi, Esq.
If to a Stockholder, to such Stockholder's address or
facsimile number set forth in Schedule A hereto,
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
(e) ENFORCEMENT. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement.
(f) 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 when taken together shall constitute one and the
same Agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings
used herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
9
Stockholders Agreement
<PAGE> 10
(h) SEVERABILITY. Whenever possible, each
provision or portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law but if any
provision or portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be re formed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(i) DEFINITIONS; CONSTRUCTION. For purposes of
this Agreement:
(i) "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 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" as described in Section 13(d)(3) of the
Exchange Act.
(ii) In the event of a stock dividend or distribution,
or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the Shares may be
changed or exchanged.
10
Stockholders Agreement
<PAGE> 11
IN WITNESS WHEREOF, Parent, Purchaser and each
Stockholder have caused this Agreement to be duly executed as of the day and
year first above written.
NEW HAMPSHIRE OAK, INC.
BY: /s/ Michael R. Herman
--------------------------------------
Name: Michael R. Herman
Title: Vice President
DN ACQUISITION CORPORATION
BY: /s/ Michael R. Herman
--------------------------------------
Name: Michael R. Herman
Title: Vice President
/s/ Jerry A. Cooper
--------------------------------------
Jerry A. Cooper
/s/ Thomas H. Roulston, II
--------------------------------------
Thomas H. Roulston, II
/s/ Michael J. Meier
--------------------------------------
Michael J. Meier
/s/ Scott D. Roulston
--------------------------------------
Scott D. Roulston
/s/ John D. Ong
--------------------------------------
John D. Ong
/s/ George H. Lewis III
--------------------------------------
George H. Lewis III
/s/ James E. Heighway
--------------------------------------
James E. Heighway
/s/ Richard W. Lock
--------------------------------------
Richard W. Lock
Stockholders Agreement
<PAGE> 12
/s/ Clifford Schumacher
--------------------------------------
Clifford Schumacher
/s/ James L. Treece
--------------------------------------
James L. Treece
/s/ Carl A. Rispoli
--------------------------------------
Carl A. Rispoli
/s/ Fred Burke
--------------------------------------
Fred Burke
/s/ Roger Drummer
--------------------------------------
Roger Drummer
/s/ Michael Madden
--------------------------------------
Michael Madden
/s/ Michael Pavlica
--------------------------------------
Michael Pavlica
/s/ David Piacenti
--------------------------------------
David Piacenti
/s/ Benjamin Scherschel
--------------------------------------
Benjamin Scherschel
/s/ Janice Schneikart
--------------------------------------
Janice Schneikart
/s/ Phillip Tomczak
--------------------------------------
Phillip Tomczak
Stockholders Agreement
<PAGE> 13
Schedule A
<TABLE>
<CAPTION>
Shares Underlying
Existing Shares Stock-Options Total
------------------------------------- ------------------------------- -------------------
Owned Owned
Directly Indirectly Vested Unvested
---------------- -------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Jerry A. Cooper 422,446 14,900 82,682 60,800 580,828
Thomas H. Roulston II 117,613 53,273 6,000 2,000 178,886
Michael J. Meier 5,210 -- 23,744 22,242 51,396
Scott D. Roulston 8,888 -- 6,000 2,000 16,888
John D. Ong 10,000 -- 2,000 2,000 14,000
George H. Lewis III 5,000 -- 6,000 2,000 13,000
James E. Heighway 3,000 1,000 6,000 2,000 12,000
Richard W. Lock 4,000 -- 6,000 2,000 12,000
Clifford Schumacher -- -- -- 10,000 10,000
James L. Treece 3,300 -- 3,250 1,750 8,300
Carl A. Rispoli 3,000 -- -- 2,000 5,000
Fred Burke -- -- 2,750 8,250 11,000
Roger E. Drummer 25,000 5,000 5,500 2,000 37,500
Michael B. Madden 15,341 -- 26,230 20,583 62,154
Michael P. Pavlica -- -- 6,250 4,750 11,000
David M. Piacenti -- -- -- 2,000 2,000
Benjamin A. Scherschel -- 1,000 -- 15,000 16,000
Janice F. Schneikart 300 -- 250 1,750 2,300
Phillip C. Tomczak -- -- 418 1,917 2,335
------------------------------------------------------------------------------------------
623,098 75,173 183,074 165,042 1,046,587
</TABLE>
Stockholders Agreement
<PAGE> 1
Exhibit 11(c)(3)
DN ACQUISITION CORPORATION
January 7, 1999
Mr. Jerry A. Cooper
2349 Belvoir Boulevard
Beachwood, Ohio 44122
Dear Mr. Cooper:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc., (the "COMPANY") and to the letter
agreements dated February 28, 1992 and July 2, 1996 between you and the Chairman
of the Board and the Chairman of the Company's Compensation Committee,
respectively, attached hereto and incorporated herein as ATTACHMENTS A AND B
(collectively the "POLICY"). Under applicable law, all rights, duties, assets,
obligations and liabilities of both the Purchaser and the Company will be vested
in the Company following the consummation of the tender offer and the merger as
contemplated by the Merger Agreement. Following the consummation of the tender
offer and/or the merger as contemplated by the Merger Agreement you may be
entitled to receive certain benefits pursuant to the Policy. In order to clarify
these and certain other rights and obligations, we have set forth such rights
and obligations in this letter. All obligations imposed on you and the Company
under the Policy, including without limitation your obligation to consult and
not to compete, shall remain in effect. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy or the Defiance,
Inc. Change of Control Policy, dated July 24, 1998 ("Company Policy"), Purchaser
agrees to cause the Company to continue and the Company agrees to continue your
salary, bonuses and all current benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you and the Company agrees to pay you a pro-rata share
of your Company annual incentive bonus, which shall equal or exceed $158,408,
based upon the number of months and days completed in the current Company fiscal
year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states as of January 1, 1999: (i) your base
salary at the highest rate paid during the twelve months preceding January 1,
1999, (ii) the average monthly amount of the bonuses awarded during the three
years preceding January 1, 1999 and (iii) the other benefits
<PAGE> 2
provided to you by the Company on January 1, 1999 (such other benefits, the
"CURRENT BENEFITS").
3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy or the Company Policy, the
Purchaser agrees to cause the Company to pay you and the Company agrees to pay
you your base salary at its highest rate during the twelve (12) months preceding
your termination date in monthly installments, plus the average monthly amount
of the bonuses awarded to you during the three (3) years preceding termination
and all Current Benefits for a period of two (2) years, which shall commence
once your twelve (12) month post termination obligation to consult (set forth at
SECTION 4 below) has been satisfied. A precondition of the Purchaser's and the
Company's obligations hereunder is the fulfillment of your obligations in the
Policy.
4. TERMINATION OF EMPLOYMENT FOR OTHER THAN VOLUNTARY RESIGNATION OR
CAUSE. If your employment with the Company is terminated other than for cause
under the Policy or your voluntary resignation, you agree to enter into a
post-termination obligation to consult to the Company and a post-termination
obligation not to compete with the Company each as described in the Policy for a
period of twelve months from the date of your termination of employment with the
Company. Purchaser and Company agree that during this twelve (12) month period
you will receive all Current Benefits and be paid in monthly installments an
amount equal to the monthly amount of base compensation at the highest rate paid
to you during the twelve (12) month period preceding your termination plus the
average monthly amount of the bonuses awarded to you during the three (3) years
preceding your termination of employment. Purchaser and Company also agree that
your consulting services to be provided to the Company shall not require you to
expend more that 20 hours per month. In addition, such consulting services will
be provided by you from whatever location you are then located. If you incur any
travel or other reasonable expense, the Company will reimburse you for such
expenses.
5. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
6. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own
<PAGE> 3
account or the account of any other Person with which you shall become
associated in any capacity or in which you shall have any ownership interest,
(i) solicit for employment, offer to employ or employ any Person who, at any
time during the preceding twelve (12) months, is or was employed by the Company
or any of its affiliates, regardless of whether such employment is direct or
through an entity with which such Person is employed or associated, or otherwise
intentionally interfere with the relationship of the Company or any of its
affiliates with any Person who or which is at the time employed by or otherwise
engaged to perform services for the Company or any such affiliate or (ii) induce
any employee of the Company or any of its affiliates to engage in any activity
which you are prohibited from engaging in under this Agreement or to terminate
his or her employment with the Company or such affiliate.
7. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or its affiliates
(as the case may be). In the event of the termination of your employment for any
reason, you will deliver promptly to the Company all materials, records, files,
notes, plans, memoranda, drawings, designs, papers, customer lists, sketches,
documents and data of any nature pertaining to your work with the Company and
its affiliates, and you will not retain any documents or data of any description
or any reproduction thereof, or any documents containing or pertaining to any
Proprietary Information. You shall certify to the Company that any such data in
machine readable form has been removed from any computer personally owned by you
and all back up copies made by you have been destroyed.
8. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 5, 6 AND 7 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting
<PAGE> 4
that position, and (b) the name of the person(s) who will represent that party
and the name of any other person who will accompany the representative(s).
Within twenty (20) days after delivery of the Response, the representatives of
both parties shall meet at a mutually acceptable time and place, and thereafter
as often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not more than fifteen (15) days. If the dispute, except as provided
below, has not been resolved by the negotiation procedure as provided herein
within sixty (60) days of the delivery date of the Dispute Notice, then the
dispute shall be settled by arbitration in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration hearing shall be held in Cuyahoga County, Ohio. A sole neutral
arbitrator will preside if the amount in controversy is less than One Hundred
Thousand and 00/100 Dollars ($100,000.00) or by three independent and impartial
arbitrators if the amount in controversy exceeds One Hundred Thousand and 00/100
Dollars ($100,000.00). The arbitrator or arbitrators will be agreed upon between
the parties within three (3) weeks of the date upon which the arbitration is
initiated. If the parties cannot agree upon an arbitrator or arbitrators within
that time period, then, within three (3) weeks, the CPR Institute for Dispute
Resolution will be asked by the sender of the Dispute Notice to select an
arbitrator or arbitrators, and the arbitration will then take place within sixty
(60) days of the appointment of the arbitrator or arbitrators. The parties agree
to fully exchange all applicable documents and exhibits three (3) weeks prior to
the arbitration hearing and to limit discovery to two (2) depositions per party,
unless a deposition is necessary to perpetuate testimony of unavailable
witnesses, in which case there will be no limitation. Should either party fail
to participate in the Negotiations, the other party may initiate arbitration
before the expiration of the sixty (60) day period noted above. All judgments of
the arbitrator or arbitrators shall be final and binding and may be entered by
any court having jurisdiction thereof. Each party hereby waives any right to
punitive, exemplary or treble damages. The party which prevails in the
arbitration or any action, suit or other proceedings to enforce the covenants of
this Agreement or to obtain money damages for the breach thereof or any document
executed in conjunction with this Agreement shall be entitled to reimbursement
from the other party for all expenses, including, without limitation, reasonable
attorneys fees and disbursements actually and reasonably incurred in connection
with the Negotiation and the arbitration.
10. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the third
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
11. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 5, 6 OR 7 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section
<PAGE> 5
enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
<PAGE> 6
Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ Richard R. Russell
Name: Richard R. Russell
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ Jerry A. Cooper By: /s/ Michael J. Meier
Jerry A. Cooper Name: Michael J. Meier
Title: Vice President / Chief Financial Officer
<PAGE> 7
Attachment A
February 28, 1992
Mr. Jerry A. Cooper
2349 Belvoir Boulevard
Beachwood, Ohio 44122
Dear Jerry:
As Chairman of the Board of Directors of Defiance, Inc. (Defiance), I am pleased
to offer you a position with Defiance as Executive Vice President and Chief
Operating Officer. It is Defiance's intent that you will serve in this capacity
for a brief transitional period after which you will assume the position of
President and Chief Executive Officer.
Based upon the fulfillment of your existing contractual commitment, it is
Defiance's understanding that you will join the Company at the earliest possible
date, but not later than June 1, 1992. You will, however, be considered an
officer of Defiance commencing upon the date of your acceptance of this offer.
Commencing upon your employment, your base salary will be at the rate of
$200,000 per annum, payable monthly. Your base salary will be reviewed upon your
appointment as President and Chief Executive Officer and annually thereafter.
However, in no event will your base salary be reduced below the annual rate of
$200,000.
Upon your acceptance of this offer, you will be granted 300,000 stock options
under Defiance, Inc.'s 1989 Stock Option Plan (the Plan). These options will
consist of a combination of Non-qualified Stock Options and Incentive Stock
Options. The latter will be utilized to the maximum extent statutorily
permissible.
You will become vested in the options, based upon the following schedule:
# OF OPTIONS TIMING OF VESTING
- - - - - - - - - - - - - - -
100,000 At time of grant
100,000 1 year after grant date
100,000 2 years after grant date
Vesting will, however, be accelerated upon your death or becoming disabled, as
described in Section 6 of the Plan. In addition, vesting will be accelerated
upon a change in control as defined herein, or upon your termination by Defiance
for other than "cause", as defined herein.
<PAGE> 8
Mr. Jerry A. Cooper
Page Two
As one of your initial projects, it will be your responsibility to develop a
formalized Executive Compensation and Benefits Program (Program) for submission
to Defiance's Board Compensation Committee for their review and approval. This
Program will include an annual incentive/bonus plan, deferred compensation
arrangement, supplemental life and disability benefits and ongoing stock option
grant guidelines. You will be a participant in the Program, which Defiance
intends to implement as of the fiscal year commencing July 1, 1992.
In addition to your participation in the compensation arrangements summarized in
this letter, as well as the benefits outlined in Defiance's employee handbook,
you will be provided with severance benefits. The following summarizes the
severance benefits, if any, which you would receive under various forms of
termination:
FORM OF TERMINATION SEVERANCE BENEFIT
- - - - - - - - - - - - - - - - - - - -
For Cause All compensation and benefit payments, except
any to which you have a vested right, will
cease as of the date of termination.
Voluntary Resignation Upon the conclusion of the required 90 day
notice period, all compensation and benefit
payments will cease, except those in which
you have a vested right. If the voluntary
resignation is the result of Defiance's
failure to promote you to the position of
President and Chief Executive Officer within
six months from your employment date, then
you will be entitled to the severance
benefits outlined under "Termination by
Defiance for other than cause or COC".
Termination Due to a Your base salary, bonus and benefits will be
Change of Control (COC) continued for a period of three years from
such termination. In addition, your medical
benefits will be continued until your
attainment of age 60.
Termination by Defiance During the required 90 day notice period,
for Other Than Cause and for 12 months thereafter, you will
or COC continue to receive your base salary,
benefits, pro rata bonus and accrued vacation
days.
<PAGE> 9
Mr. Jerry A. Cooper
Page Three
"Termination for cause" shall be defined as "gross misconduct or the commission
of illegalities other than misdemeanors, such as minor traffic violations".
A "change of control" shall be deemed to have taken place if as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets or contested
election or any combination of the foregoing transactions, the persons who were
directors as of the date of this letter shall cease to constitute a majority of
the Board of Directors of the Company or any parent of or successor to the
Company. Termination due to a change in control would occur if your employment
is terminated, your responsibilities are materially reduced or you are required
to relocate within two years after a COC.
Jerry, as we have discussed, the other members of Defiance's Board of Directors
and I are excited about the prospects of your Joining the Company. We are
confident you will do an excellent Job of increasing the shareholder's value. In
this regard, we believe we have structured a compensation package which will
reward you for such success.
Sincerely,
/s/ Thomas H. Roulston
Thomas H. Roulston
Chairman of the Board
Defiance, Inc.
THR/tap
ACCEPTED: /s/ Jerry A. Cooper
JERRY A. COOPER
DATE: March 2, 1992
---------------------
IN ORDER TO DOCUMENT YOUR ACCEPTANCE OF OUR OFFER OF EMPLOYMENT, PLEASE SIGN AND
RETURN THE ENCLOSED "ACCEPTANCE COPY" OF THIS LETTER.
<PAGE> 10
Attachment B
July 2, 1996
Mr. Jerry A. Cooper
2349 Belvoir Boulevard
Beachwood, Ohio 44122
Dear Jerry:
This letter responds to recent inquiries regarding the Compensation
Committee's discretion with respect to whether retirement under Section 5.1 of
the Defiance, Inc. Limited Supplemental Executive Retirement Plan (the "Plan")
has occurred and is intended to clarify the criteria required by the Committee.
This letter also addresses your current severance package and the discussions we
have had related thereto.
It is the policy of the Compensation Committee to deem the CEO to be
retired if, upon termination without cause, the executive has attained age
fifty-five (55), completed five (5) years of service, and entered into an
agreement not to compete with the Company. The non-competition agreement must be
for a period of at least one (1) year. Furthermore, an executive who is
considered to have retired under this criteria is encouraged to enter into a
post-termination consulting agreement with the Company.
You have expressed a concern that your current severance package may have
unfavorable tax consequences. The Compensation Committee, on the other hand, has
expressed an interest in retaining your valued services, and has requested that,
in the event of your involuntary termination without cause, you make yourself
available to consult, as needed, with your successor. Given the recognized value
of your services, and recognizing your expressed concerns, the following
modifications to the severance benefits described in your letter of employment,
dated February 28, 1992 are offered:
1. For a period of twelve (12) months following your termination for
reasons other than Voluntary Resignation or Cause, you will enter
into a post-termination obligation to consult to the Company. As a
consultant, you may be called upon to assist your successor in a
transitional role, and act as an advisor to your successor or the
Board of Directors, as requested. Your duties in this capacity
will be satisfied once the twelve (12) month period expires.
2. For a period of twelve (12) months following your termination for
reasons other than Voluntary Resignation or Cause, you will enter
into a post-termination obligation not to compete with the
Company. Competition means the rendering of professional services
with respect to products which are identical and/or similar to
products of the Company ("Products"), other than in your capacity
as the Company's consultant, to any person or organization that
purchased Products or Product services from the Company, or that
provided similar Products or Product services in the same
geographical area as the Company, during the period of your
employment with the Company.
<PAGE> 11
Mr. Jerry A. Cooper Page 2
July 2, 1996
3. No severance shall be provided in the event of your termination by
Defiance for Other Than Cause. Additionally, in the event of your
Termination Due to a Change of Control, your base salary, at the
highest rate during the twelve (12) months preceding your
termination date, plus the average monthly amount of the bonuses
awarded during the three (3) years preceding termination, and
benefits shall be provided for a period of two (2) years, and this
period shall commence once the post-termination obligation to
consult has been satisfied.
4. As compensation for your services during the post-termination
obligation to consult, and the post-termination obligation not to
compete, you will receive all current benefits and be paid in
monthly installments throughout the twelve (12) months following
your termination. The amount of each installment will equal the
monthly amount of base compensation at the highest rate during the
twelve (12) months preceding your termination date, plus the
average monthly amount of the bonuses awarded during the three (3)
years preceding termination.
5. The Company acknowledges and guarantees its obligations to pay to
you all consideration incident to your aforementioned
post-termination obligations to consult, not to compete, as well
as the Change of Control, unless and until those payments are
actually received by you from third parties. A precondition of the
Company's obligation is the executive's fulfillment of the
aforementioned obligations.
Jerry, I hope that this letter resolves the questions you had regarding
your benefits under the Plan and the concerns you raised with regards to your
severance package. If you would like to accept the arrangements outlined above,
please sign and return the enclosed "acceptance copy" of this letter.
Very truly yours,
/s/ Scott D. Roulston
--------------------------------
Chairman Compensation Committee
ACCEPTED: /s/ Jerry A. Cooper
Jerry A. Cooper
DATE: July 11, 1996
<PAGE> 1
Exhibit 11(c)(4)
DN ACQUISITION CORPORATION
January 7, 1999
Michael J. Meier
2841 Falmouth Road
Shaker Heights, OH 44122
Dear Mr. Meier:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc. (the "COMPANY") and to the Defiance Inc.
Change of Control Policy dated July 24, 1998 attached hereto and incorporated
herein as ATTACHMENT A (the "POLICY"). Under applicable law, all rights, duties,
assets, obligations and liabilities of both the Purchaser and the Company will
be vested in the Company following the consummation of the tender offer and the
merger as contemplated by the Merger Agreement. Following the consummation of
the tender offer and/or the merger as contemplated by the Merger Agreement, you
may be entitled to receive certain benefits pursuant to the Policy. In order to
clarify these and certain other rights and obligations, we have set forth such
rights and obligations in this letter. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy, Purchaser agrees
that it will cause the Company to continue, and the Company agrees to continue,
your salary, bonuses and all Current Benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you, and the Company agrees to pay you, a pro-rata
share of your Company annual incentive bonus, which shall equal or exceed the
amount of $36,659.04, based upon the number of months and days completed in the
current Company fiscal year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states: (i) your base salary as of January
1, 1999, (ii) the average
<PAGE> 2
incentive bonus paid to you for the two years preceding January 1, 1999 and
(iii) all benefits provided to you by the Company on January 1, 1999 ( such
other benefits, the "Current Benefits").
3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy, the Purchaser agrees to
cause the Company to pay you and the Company agrees to pay you for a period of
two (2) years in monthly payments: (i) your base salary immediately before your
termination date; (ii) the average monthly amount of the incentive bonuses
awarded to you during the two (2) years preceding termination; and (iii) all
Current Benefits.
4. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
5. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own account or the account of any
other Person with which you shall become associated in any capacity or in which
you shall have any ownership interest, (i) solicit for employment, offer to
employ or employ any Person who, at any time during the preceding twelve (12)
months, is or was employed by the Company or any of its affiliates, regardless
of whether such employment is direct or through an entity with which such Person
is employed or associated, or otherwise intentionally interfere with the
relationship of the Company or any of its affiliates with any Person who or
which is at the time employed by or otherwise engaged to perform services for
the Company or any such affiliate, or (ii) induce any employee of the Company or
any of its affiliates to engage in any activity which you are prohibited from
engaging in under this Agreement or to terminate his or her employment with the
Company or such affiliate.
6. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or
<PAGE> 3
its affiliates (as the case may be). In the event of the termination of your
employment for any reason, you will deliver promptly to the Company all
materials, records, files, notes, plans, memoranda, drawings, designs, papers,
customer lists, sketches, documents and data of any nature pertaining to your
work with the Company and its affiliates, and you will not retain any documents
or data of any description or any reproduction thereof, or any documents
containing or pertaining to any Proprietary Information. You shall certify to
the Company that any such data in machine readable form has been removed from
any computer personally owned by you and all back up copies made by you have
been destroyed.
7. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 4, 5, AND 6 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
8. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the second
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name of the person(s) who will represent that party and
the name of any other person who will accompany the representative(s). Within
twenty (20) days after delivery of the Response, the representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not more than fifteen (15) days. If the dispute, except as provided
below, has not been resolved by the negotiation procedure as provided herein
within sixty (60) days of the delivery date of the Dispute Notice, then the
dispute shall be settled by arbitration in accordance with the then current
<PAGE> 4
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration hearing shall be held in Cuyahoga County, Ohio. A sole neutral
arbitrator will preside if the amount in controversy is less than One Hundred
Thousand and 00/100 Dollars ($100,000.00) or by three independent and impartial
arbitrators if the amount in controversy exceeds One Hundred Thousand and 00/100
Dollars ($100,000.00). The arbitrator or arbitrators will be agreed upon between
the parties within three (3) weeks of the date upon which the arbitration is
initiated. If the parties cannot agree upon an arbitrator or arbitrators within
that time period, then, within three (3) weeks, the CPR Institute for Dispute
Resolution will be asked by the sender of the Dispute Notice to select an
arbitrator or arbitrators, and the arbitration will then take place within sixty
(60) days of the appointment of the arbitrator or arbitrators. The parties agree
to fully exchange all applicable documents and exhibits three (3) weeks prior to
the arbitration hearing and to limit discovery to two (2) depositions per party,
unless a deposition is necessary to perpetuate testimony of unavailable
witnesses, in which case there will be no limitation. Should either party fail
to participate in the Negotiations, the other party may initiate arbitration
before the expiration of the sixty (60) day period noted above. All judgments of
the arbitrator or arbitrators shall be final and binding and may be entered by
any court having jurisdiction thereof. Each party hereby waives any right to
punitive, exemplary or treble damages. The party which prevails in the
arbitration or any action, suit or other proceedings to enforce the covenants of
this Agreement or to obtain money damages for the breach thereof shall be
entitled to reimbursement from the other party for all expenses, including,
without limitation, reasonable attorneys fees and disbursements actually and
reasonably incurred.
10. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 4, 5 OR 6 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
<PAGE> 5
Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ Richard R. Russell
Name: Richard R. Russell
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ Michael J. Meier By: /s/ Jerry A. Cooper
Michael J. Meier Name: Jerry A. Cooper
Title: President / Chief Executive Officer
<PAGE> 6
ATTACHMENT A
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income to
facilitate the change in their lives resulting from termination from the Company
due to a Change of Control. This policy obligates the Company accordingly to
these executives subject to changes in applicable law and further actions of the
Board of Directors. The Board of Directors reserves the right, at its
discretion, to alter, amend or even terminate this policy, however, any such
change in the policy shall only take effect two (2) years after the date upon
which the Board of Directors institutes said change of the policy.
If an executive is terminated due to a Change of Control, the executive's base
salary (immediately before said termination), incentive bonuses (which bonuses
shall be the average of the incentive bonuses paid to the executive for the two
years preceding said termination), all insurance, medical benefits and company
car or car allowance (provided to the executive immediately prior to said
termination), will be continued for a period of two years from date of
termination, and all stock options outstanding will be immediately vested as
well as all contributions to the Defiance, Inc. Retirement Savings Plan (401(k)
Plan), the Defiance, Inc. Supplemental Executive Retirement Plan (SERP) and the
Defiance, Inc. Supplemental Savings and Deferred Compensation Plan (make-whole
SERP).
A "Change of Control" shall be deemed to have taken place if, as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets, contested
election, or any combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the first of any
such events to occur, shall cease to constitute a majority of the board of
directors of the Company or any parent or successor to the Company.
Termination due to a Change in Control is deemed to occur if, within two years
after the Change of Control, without the executive's written approval: (1) the
executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires that the
executive's principal place of work is more than twenty-five (25) miles from
the executive's principal place of work immediately prior to the Change of
Control or the executive is required to travel in connection with the
executive's employment to a greater degree than was customary during the year
prior to the Change of Control; or (5) there is a liquidation, dissolution,
consolidation or merger of the Company, or transfer or all or a significant
portion of its assets unless the successor(s) assume all the duties and
obligations to the executive set forth in this policy.
This policy updates and supersedes the Change of Control policy adopted by the
Board of Directors on September 22, 1994.
The key executives to whom this policy applies as of July 24, 1998 are as
follows:
Michael Meier - VP Finance and Chief Financial Officer, Defiance, Inc.
Cliff Schumacher - VP Marketing and Corporate Development, Defiance, Inc.
Benjamin Scherschel - President, Defiance Precision Products, Inc.
Fred Burke - President, Hy-Form Products, Inc. and Binderline
Draftline, Inc.
Michael Madden - President, Defiance Testing & Engineering Services, Inc.
<PAGE> 1
Exhibit 11(c)(5)
DN ACQUISITION CORPORATION
January 7, 1999
Clifford Schumacher
1390 Oak Hollow
Milford, MI 48380
Dear Mr. Schumacher:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc. (the "COMPANY") and to the Defiance Inc.
Change of Control Policy dated July 24, 1998 attached hereto and incorporated
herein as ATTACHMENT A (the "POLICY"). Under applicable law, all rights, duties,
assets, obligations and liabilities of both the Purchaser and the Company will
be vested in the Company following the consummation of the tender offer and the
merger as contemplated by the Merger Agreement. Following the consummation of
the tender offer and/or the merger as contemplated by the Merger Agreement, you
may be entitled to receive certain benefits pursuant to the Policy. In order to
clarify these and certain other rights and obligations, we have set forth such
rights and obligations in this letter. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy, Purchaser agrees
that it will cause the Company to continue, and the Company agrees to continue,
your salary, bonuses and all Current Benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you, and the Company agrees to pay you, a pro-rata
share of your Company annual incentive bonus, which shall equal or exceed the
amount of $24,000.00, based upon the number of months and days completed in the
current Company fiscal year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states: (i) your base salary as of January
1, 1999, (ii) the average incentive bonus paid to you for the two years
preceding January 1, 1999 and (iii) all benefits provided to you by the Company
on January 1, 1999 ( such other benefits, the "Current Benefits").
<PAGE> 2
3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy, the Purchaser agrees to
cause the Company to pay you and the Company agrees to pay you for a period of
two (2) years in monthly payments: (i) your base salary immediately before your
termination date; (ii) the average monthly amount of the incentive bonuses
awarded to you during the two (2) years preceding termination; and (iii) all
Current Benefits.
4. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
5. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own account or the account of any
other Person with which you shall become associated in any capacity or in which
you shall have any ownership interest, (i) solicit for employment, offer to
employ or employ any Person who, at any time during the preceding twelve (12)
months, is or was employed by the Company or any of its affiliates, regardless
of whether such employment is direct or through an entity with which such Person
is employed or associated, or otherwise intentionally interfere with the
relationship of the Company or any of its affiliates with any Person who or
which is at the time employed by or otherwise engaged to perform services for
the Company or any such affiliate, or (ii) induce any employee of the Company or
any of its affiliates to engage in any activity which you are prohibited from
engaging in under this Agreement or to terminate his or her employment with the
Company or such affiliate.
6. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or
<PAGE> 3
its affiliates (as the case may be). In the event of the termination of your
employment for any reason, you will deliver promptly to the Company all
materials, records, files, notes, plans, memoranda, drawings, designs, papers,
customer lists, sketches, documents and data of any nature pertaining to your
work with the Company and its affiliates, and you will not retain any documents
or data of any description or any reproduction thereof, or any documents
containing or pertaining to any Proprietary Information. You shall certify to
the Company that any such data in machine readable form has been removed from
any computer personally owned by you and all back up copies made by you have
been destroyed.
7. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 4, 5, AND 6 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
8. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the second
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name of the person(s) who will represent that party and
the name of any other person who will accompany the representative(s). Within
twenty (20) days after delivery of the Response, the representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not
<PAGE> 4
more than fifteen (15) days. If the dispute, except as provided below, has not
been resolved by the negotiation procedure as provided herein within sixty (60)
days of the delivery date of the Dispute Notice, then the dispute shall be
settled by arbitration in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
hearing shall be held in Cuyahoga County, Ohio. A sole neutral arbitrator will
preside if the amount in controversy is less than One Hundred Thousand and
00/100 Dollars ($100,000.00) or by three independent and impartial arbitrators
if the amount in controversy exceeds One Hundred Thousand and 00/100 Dollars
($100,000.00). The arbitrator or arbitrators will be agreed upon between the
parties within three (3) weeks of the date upon which the arbitration is
initiated. If the parties cannot agree upon an arbitrator or arbitrators within
that time period, then, within three (3) weeks, the CPR Institute for Dispute
Resolution will be asked by the sender of the Dispute Notice to select an
arbitrator or arbitrators, and the arbitration will then take place within sixty
(60) days of the appointment of the arbitrator or arbitrators. The parties agree
to fully exchange all applicable documents and exhibits three (3) weeks prior to
the arbitration hearing and to limit discovery to two (2) depositions per party,
unless a deposition is necessary to perpetuate testimony of unavailable
witnesses, in which case there will be no limitation. Should either party fail
to participate in the Negotiations, the other party may initiate arbitration
before the expiration of the sixty (60) day period noted above. All judgments of
the arbitrator or arbitrators shall be final and binding and may be entered by
any court having jurisdiction thereof. Each party hereby waives any right to
punitive, exemplary or treble damages. The party which prevails in the
arbitration or any action, suit or other proceedings to enforce the covenants of
this Agreement or to obtain money damages for the breach thereof shall be
entitled to reimbursement from the other party for all expenses, including,
without limitation, reasonable attorneys fees and disbursements actually and
reasonably incurred.
10. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 4, 5 OR 6 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
<PAGE> 5
Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ Richard R. Russell
Name: Richard R. Russell
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ Clifford Schumacher By: /s/ Jerry A. Cooper
Clifford Schumacher Name: Jerry A. Cooper
Title: President / Chief Executive Officer
<PAGE> 6
ATTACHMENT A
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income to
facilitate the change in their lives resulting from termination from the Company
due to a Change of Control. This policy obligates the Company accordingly to
these executives subject to changes in applicable law and further actions of the
Board of Directors. The Board of Directors reserves the right, at its
discretion, to alter, amend or even terminate this policy, however, any such
change in the policy shall only take effect two (2) years after the date upon
which the Board of Directors institutes said change of the policy.
If an executive is terminated due to a Change of Control, the executive's base
salary (immediately before said termination), incentive bonuses (which bonuses
shall be the average of the incentive bonuses paid to the executive for the two
years preceding said termination), all insurance, medical benefits and company
car or car allowance (provided to the executive immediately prior to said
termination), will be continued for a period of two years from date of
termination, and all stock options outstanding will be immediately vested as
well as all contributions to the Defiance, Inc. Retirement Savings Plan (401(k)
Plan), the Defiance, Inc. Supplemental Executive Retirement Plan (SERP) and the
Defiance, Inc. Supplemental Savings and Deferred Compensation Plan (make-whole
SERP).
A "Change of Control" shall be deemed to have taken place if, as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets, contested
election, or any combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the first of any
such events to occur, shall cease to constitute a majority of the board of
directors of the Company or any parent or successor to the Company.
Termination due to a Change in Control is deemed to occur if, within two years
after the Change of Control, without the executive's written approval: (1) the
executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires that the
executive's principal place of work is more than twenty-five (25) miles from the
executive's principal place of work immediately prior to the Change of Control
or the executive is required to travel in connection with the executive's
employment to a greater degree than was customary during the year prior to the
Change of Control; or (5) there is a liquidation, dissolution, consolidation or
merger of the Company, or transfer or all or a significant portion of its assets
unless the successor(s) assume all the duties and obligations to the executive
set forth in this policy.
This policy updates and supersedes the Change of Control policy adopted by the
Board of Directors on September 22, 1994.
The key executives to whom this policy applies as of July 24, 1998 are as
follows:
Michael Meier - VP Finance and Chief Financial Officer, Defiance, Inc.
Cliff Schumacher - VP Marketing and Corporate Development, Defiance, Inc.
Benjamin Scherschel - President, Defiance Precision Products, Inc.
Fred Burke - President, Hy-Form Products, Inc. and Binderline
Draftline, Inc.
Michael Madden - President, Defiance Testing & Engineering Services, Inc.
<PAGE> 1
Exhibit 11(c)(6)
DN ACQUISITION CORPORATION
January 7, 1999
Michael B. Madden
21420 Parklane
Farmington Hills, MI 48335
Dear Mr. Madden:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc. (the "COMPANY") and to the Defiance Inc.
Change of Control Policy dated July 24, 1998 attached hereto and incorporated
herein as ATTACHMENT A (the "POLICY"). Under applicable law, all rights, duties,
assets, obligations and liabilities of both the Purchaser and the Company will
be vested in the Company following the consummation of the tender offer and the
merger as contemplated by the Merger Agreement. Following the consummation of
the tender offer and/or the merger as contemplated by the Merger Agreement, you
may be entitled to receive certain benefits pursuant to the Policy. In order to
clarify these and certain other rights and obligations, we have set forth such
rights and obligations in this letter. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy, Purchaser agrees
that it will cause the Company to continue, and the Company agrees to continue,
your salary, bonuses and all Current Benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you, and the Company agrees to pay you, a pro-rata
share of your Company annual incentive bonus, which shall equal or exceed the
amount of $14,705.04, based upon the number of months and days completed in the
current Company fiscal year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states: (i) your base salary as of January
1, 1999, (ii) the average incentive bonus paid to you for the two years
preceding January 1, 1999 and (iii) all benefits provided to you by the Company
on January 1, 1999 ( such other benefits, the "Current Benefits").
<PAGE> 2
3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy, the Purchaser agrees to
cause the Company to pay you and the Company agrees to pay you for a period of
two (2) years in monthly payments: (i) your base salary immediately before your
termination date; (ii) the average monthly amount of the incentive bonuses
awarded to you during the two (2) years preceding termination; and (iii) all
Current Benefits.
4. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
5. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own account or the account of any
other Person with which you shall become associated in any capacity or in which
you shall have any ownership interest, (i) solicit for employment, offer to
employ or employ any Person who, at any time during the preceding twelve (12)
months, is or was employed by the Company or any of its affiliates, regardless
of whether such employment is direct or through an entity with which such Person
is employed or associated, or otherwise intentionally interfere with the
relationship of the Company or any of its affiliates with any Person who or
which is at the time employed by or otherwise engaged to perform services for
the Company or any such affiliate, or (ii) induce any employee of the Company or
any of its affiliates to engage in any activity which you are prohibited from
engaging in under this Agreement or to terminate his or her employment with the
Company or such affiliate.
6. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or its affiliates
(as the case may be). In the event of the termination of your employment for any
reason, you will deliver promptly to the Company all materials, records, files,
notes, plans, memoranda, drawings, designs, papers, customer lists, sketches,
documents and data of any nature pertaining to your work with the Company and
its affiliates, and you will not retain any
<PAGE> 3
documents or data of any description or any reproduction thereof, or any
documents containing or pertaining to any Proprietary Information. You shall
certify to the Company that any such data in machine readable form has been
removed from any computer personally owned by you and all back up copies made by
you have been destroyed.
7. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 4, 5, AND 6 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
8. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the second
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name of the person(s) who will represent that party and
the name of any other person who will accompany the representative(s). Within
twenty (20) days after delivery of the Response, the representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not more than fifteen (15) days. If the dispute, except as provided
below, has not been resolved by the negotiation procedure as provided herein
within sixty (60) days of the delivery date of the Dispute Notice, then the
dispute shall be settled by arbitration in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration hearing shall be held in Cuyahoga County, Ohio. A sole neutral
arbitrator will preside if the amount in controversy is less than One Hundred
Thousand and 00/100 Dollars ($100,000.00) or by three independent and impartial
arbitrators if the amount in controversy exceeds One Hundred Thousand and 00/100
Dollars ($100,000.00). The arbitrator or arbitrators will be agreed upon
<PAGE> 4
between the parties within three (3) weeks of the date upon which the
arbitration is initiated. If the parties cannot agree upon an arbitrator or
arbitrators within that time period, then, within three (3) weeks, the CPR
Institute for Dispute Resolution will be asked by the sender of the Dispute
Notice to select an arbitrator or arbitrators, and the arbitration will then
take place within sixty (60) days of the appointment of the arbitrator or
arbitrators. The parties agree to fully exchange all applicable documents and
exhibits three (3) weeks prior to the arbitration hearing and to limit discovery
to two (2) depositions per party, unless a deposition is necessary to perpetuate
testimony of unavailable witnesses, in which case there will be no limitation.
Should either party fail to participate in the Negotiations, the other party may
initiate arbitration before the expiration of the sixty (60) day period noted
above. All judgments of the arbitrator or arbitrators shall be final and binding
and may be entered by any court having jurisdiction thereof. Each party hereby
waives any right to punitive, exemplary or treble damages. The party which
prevails in the arbitration or any action, suit or other proceedings to enforce
the covenants of this Agreement or to obtain money damages for the breach
thereof shall be entitled to reimbursement from the other party for all
expenses, including, without limitation, reasonable attorneys fees and
disbursements actually and reasonably incurred.
10. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 4, 5 OR 6 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
<PAGE> 5
Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ Richard R. Russell
------------------------------------------
Name: Richard R. Russell
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ Michael B. Madden By: /s/ Jerry A. Cooper
- --------------------- ------------------------------------------
Michael B. Madden Name: Jerry A. Cooper
Title: President / Chief Executive Officer
<PAGE> 6
ATTACHMENT A
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income to
facilitate the change in their lives resulting from termination from the Company
due to a Change of Control. This policy obligates the Company accordingly to
these executives subject to changes in applicable law and further actions of the
Board of Directors. The Board of Directors reserves the right, at its
discretion, to alter, amend or even terminate this policy, however, any such
change in the policy shall only take effect two (2) years after the date upon
which the Board of Directors institutes said change of the policy.
If an executive is terminated due to a Change of Control, the executive's base
salary (immediately before said termination), incentive bonuses (which bonuses
shall be the average of the incentive bonuses paid to the executive for the two
years preceding said termination), all insurance, medical benefits and company
car or car allowance (provided to the executive immediately prior to said
termination), will be continued for a period of two years from date of
termination, and all stock options outstanding will be immediately vested as
well as all contributions to the Defiance, Inc. Retirement Savings Plan (401(k)
Plan), the Defiance, Inc. Supplemental Executive Retirement Plan (SERP) and the
Defiance, Inc. Supplemental Savings and Deferred Compensation Plan (make-whole
SERP).
A "Change of Control" shall be deemed to have taken place if, as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets, contested
election, or any combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the first of any
such events to occur, shall cease to constitute a majority of the board of
directors of the Company or any parent or successor to the Company.
Termination due to a Change in Control is deemed to occur if, within two years
after the Change of Control, without the executive's written approval: (1) the
executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires that the
executive's principal place of work is more than twenty-five (25) miles from
the executive's principal place of work immediately prior to the Change of
Control or the executive is required to travel in connection with the
executive's employment to a greater degree than was customary during the year
prior to the Change of Control; or (5) there is a liquidation, dissolution,
consolidation or merger of the Company, or transfer or all or a significant
portion of its assets unless the successor(s) assume all the duties and
obligations to the executive set forth in this policy.
This policy updates and supersedes the Change of Control policy adopted by the
Board of Directors on September 22, 1994.
The key executives to whom this policy applies as of July 24, 1998 are as
follows:
Michael Meier - VP Finance and Chief Financial Officer, Defiance, Inc.
Cliff Schumacher - VP Marketing and Corporate Development, Defiance, Inc.
Benjamin Scherschel - President, Defiance Precision Products, Inc.
Fred Burke - President, Hy-Form Products, Inc. and Binderline
Draftline, Inc.
Michael Madden - President, Defiance Testing & Engineering Services, Inc.
<PAGE> 1
Exhibit 11(c)(7)
DN ACQUISITION CORPORATION
January 7, 1999
Benjamin A. Scherschel
1246 Hilton Head Court
Defiance, OH 43512
Dear Mr. Scherschel:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc. (the "COMPANY") and to the Defiance Inc.
Change of Control Policy dated July 24, 1998 attached hereto and incorporated
herein as ATTACHMENT A (the "POLICY"). Under applicable law, all rights, duties,
assets, obligations and liabilities of both the Purchaser and the Company will
be vested in the Company following the consummation of the tender offer and the
merger as contemplated by the Merger Agreement. Following the consummation of
the tender offer and/or the merger as contemplated by the Merger Agreement, you
may be entitled to receive certain benefits pursuant to the Policy. In order to
clarify these and certain other rights and obligations, we have set forth such
rights and obligations in this letter. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy, Purchaser agrees
that it will cause the Company to continue, and the Company agrees to continue,
your salary, bonuses and all Current Benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you, and the Company agrees to pay you, a pro-rata
share of your Company annual incentive bonus, which shall equal or exceed the
amount of $36,000.00, based upon the number of months and days completed in the
current Company fiscal year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states: (i) your base salary as of January
1, 1999, (ii) the average incentive bonus paid to you for the two years
preceding January 1, 1999 and (iii) all benefits provided to you by the Company
on January 1, 1999 ( such other benefits, the "Current Benefits").
<PAGE> 2
3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy, the Purchaser agrees to
cause the Company to pay you and the Company agrees to pay you for a period of
two (2) years in monthly payments: (i) your base salary immediately before your
termination date; (ii) the average monthly amount of the incentive bonuses
awarded to you during the two (2) years preceding termination; and (iii) all
Current Benefits.
4. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
5. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own account or the account of any
other Person with which you shall become associated in any capacity or in which
you shall have any ownership interest, (i) solicit for employment, offer to
employ or employ any Person who, at any time during the preceding twelve (12)
months, is or was employed by the Company or any of its affiliates, regardless
of whether such employment is direct or through an entity with which such Person
is employed or associated, or otherwise intentionally interfere with the
relationship of the Company or any of its affiliates with any Person who or
which is at the time employed by or otherwise engaged to perform services for
the Company or any such affiliate, or (ii) induce any employee of the Company or
any of its affiliates to engage in any activity which you are prohibited from
engaging in under this Agreement or to terminate his or her employment with the
Company or such affiliate.
6. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or its affiliates
(as the case may be). In the event of the termination of your employment for any
reason, you will deliver promptly to the Company all materials, records, files,
notes, plans, memoranda, drawings, designs, papers, customer lists, sketches,
documents and data of any
<PAGE> 3
nature pertaining to your work with the Company and its affiliates, and you will
not retain any documents or data of any description or any reproduction thereof,
or any documents containing or pertaining to any Proprietary Information. You
shall certify to the Company that any such data in machine readable form has
been removed from any computer personally owned by you and all back up copies
made by you have been destroyed.
7. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 4, 5, AND 6 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
8. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the second
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name of the person(s) who will represent that party and
the name of any other person who will accompany the representative(s). Within
twenty (20) days after delivery of the Response, the representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not more than fifteen (15) days. If the dispute, except as provided
below, has not been resolved by the negotiation procedure as provided herein
within sixty (60) days of the delivery date of the Dispute Notice, then the
dispute shall be settled by arbitration in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration hearing shall be held in Cuyahoga County, Ohio. A sole neutral
arbitrator will preside if the amount in controversy is less than One Hundred
Thousand and 00/100 Dollars ($100,000.00) or by three
<PAGE> 4
independent and impartial arbitrators if the amount in controversy exceeds One
Hundred Thousand and 00/100 Dollars ($100,000.00). The arbitrator or arbitrators
will be agreed upon between the parties within three (3) weeks of the date upon
which the arbitration is initiated. If the parties cannot agree upon an
arbitrator or arbitrators within that time period, then, within three (3) weeks,
the CPR Institute for Dispute Resolution will be asked by the sender of the
Dispute Notice to select an arbitrator or arbitrators, and the arbitration will
then take place within sixty (60) days of the appointment of the arbitrator or
arbitrators. The parties agree to fully exchange all applicable documents and
exhibits three (3) weeks prior to the arbitration hearing and to limit discovery
to two (2) depositions per party, unless a deposition is necessary to perpetuate
testimony of unavailable witnesses, in which case there will be no limitation.
Should either party fail to participate in the Negotiations, the other party may
initiate arbitration before the expiration of the sixty (60) day period noted
above. All judgments of the arbitrator or arbitrators shall be final and binding
and may be entered by any court having jurisdiction thereof. Each party hereby
waives any right to punitive, exemplary or treble damages. The party which
prevails in the arbitration or any action, suit or other proceedings to enforce
the covenants of this Agreement or to obtain money damages for the breach
thereof shall be entitled to reimbursement from the other party for all
expenses, including, without limitation, reasonable attorneys fees and
disbursements actually and reasonably incurred.
10. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 4, 5 OR 6 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
<PAGE> 5
Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ Richard R. Russell
Name: Richard R. Russell
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ Benjamin A. Scherschel By: /s/ Jerry A. Cooper
Benjamin A. Scherschel Name: Jerry A. Cooper
Title: President / Chief Executive Officer
<PAGE> 6
ATTACHMENT A
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income to
facilitate the change in their lives resulting from termination from the Company
due to a Change of Control. This policy obligates the Company accordingly to
these executives subject to changes in applicable law and further actions of the
Board of Directors. The Board of Directors reserves the right, at its
discretion, to alter, amend or even terminate this policy, however, any such
change in the policy shall only take effect two (2) years after the date upon
which the Board of Directors institutes said change of the policy.
If an executive is terminated due to a Change of Control, the executive's base
salary (immediately before said termination), incentive bonuses (which bonuses
shall be the average of the incentive bonuses paid to the executive for the two
years preceding said termination), all insurance, medical benefits and company
car or car allowance (provided to the executive immediately prior to said
termination), will be continued for a period of two years from date of
termination, and all stock options outstanding will be immediately vested as
well as all contributions to the Defiance, Inc. Retirement Savings Plan (401(k)
Plan), the Defiance, Inc. Supplemental Executive Retirement Plan (SERP) and the
Defiance, Inc. Supplemental Savings and Deferred Compensation Plan (make-whole
SERP).
A "Change of Control" shall be deemed to have taken place if, as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets, contested
election, or any combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the first of any
such events to occur, shall cease to constitute a majority of the board of
directors of the Company or any parent or successor to the Company.
Termination due to a Change in Control is deemed to occur if, within two years
after the Change of Control, without the executive's written approval: (1) the
executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires that the
executive's principal place of work is more than twenty-five (25) miles from the
executive's principal place of work immediately prior to the Change of Control
or the executive is required to travel in connection with the executive's
employment to a greater degree than was customary during the year prior to the
Change of Control; or (5) there is a liquidation, dissolution, consolidation or
merger of the Company, or transfer or all or a significant portion of its assets
unless the successor(s) assume all the duties and obligations to the executive
set forth in this policy.
This policy updates and supersedes the Change of Control policy adopted by the
Board of Directors on September 22, 1994.
The key executives to whom this policy applies as of July 24, 1998 are as
follows:
Michael Meier - VP Finance and Chief Financial Officer, Defiance, Inc.
Cliff Schumacher - VP Marketing and Corporate Development, Defiance, Inc.
Benjamin Scherschel - President, Defiance Precision Products, Inc.
Fred Burke - President, Hy-Form Products, Inc. and Binderline
Draftline, Inc.
Michael Madden - President, Defiance Testing & Engineering Services, Inc.
<PAGE> 1
Exhibit 11(c)(8)
DN ACQUISITION CORPORATION
January 7, 1999
Fred Burke
9777 Mortenview Drive
Taylor, MI 48180
Dear Mr. Burke:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc. (the "COMPANY") and to the Defiance Inc.
Change of Control Policy dated July 24, 1998 attached hereto and incorporated
herein as ATTACHMENT A (the "POLICY"). Under applicable law, all rights, duties,
assets, obligations and liabilities of both the Purchaser and the Company will
be vested in the Company following the consummation of the tender offer and the
merger as contemplated by the Merger Agreement. Following the consummation of
the tender offer and/or the merger as contemplated by the Merger Agreement, you
may be entitled to receive certain benefits pursuant to the Policy. In order to
clarify these and certain other rights and obligations, we have set forth such
rights and obligations in this letter. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy, Purchaser agrees
that it will cause the Company to continue, and the Company agrees to continue,
your salary, bonuses and all Current Benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you, and the Company agrees to pay you, a pro-rata
share of your Company annual incentive bonus, which shall equal or exceed
$10,500, based upon the number of months and days completed in the current
Company fiscal year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states: (i) your base salary as of January
1, 1999, (ii) the average incentive bonus paid to you for the two years
preceding January 1, 1999 and (iii) all benefits provided to you by the Company
on January 1, 1999 ( such other benefits, the "Current Benefits").
<PAGE> 2
3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy, the Purchaser agrees to
cause the Company to pay you and the Company agrees to pay you for a period of
two (2) years in monthly payments: (i) your base salary immediately before your
termination date; (ii) the average monthly amount of the incentive bonuses
awarded to you during the two (2) years preceding termination; and (iii) all
Current Benefits.
4. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
5. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own account or the account of any
other Person with which you shall become associated in any capacity or in which
you shall have any ownership interest, (i) solicit for employment, offer to
employ or employ any Person who, at any time during the preceding twelve (12)
months, is or was employed by the Company or any of its affiliates, regardless
of whether such employment is direct or through an entity with which such Person
is employed or associated, or otherwise intentionally interfere with the
relationship of the Company or any of its affiliates with any Person who or
which is at the time employed by or otherwise engaged to perform services for
the Company or any such affiliate, or (ii) induce any employee of the Company or
any of its affiliates to engage in any activity which you are prohibited from
engaging in under this Agreement or to terminate his or her employment with the
Company or such affiliate.
6. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or
<PAGE> 3
its affiliates (as the case may be). In the event of the termination of your
employment for any reason, you will deliver promptly to the Company all
materials, records, files, notes, plans, memoranda, drawings, designs, papers,
customer lists, sketches, documents and data of any nature pertaining to your
work with the Company and its affiliates, and you will not retain any documents
or data of any description or any reproduction thereof, or any documents
containing or pertaining to any Proprietary Information. You shall certify to
the Company that any such data in machine readable form has been removed from
any computer personally owned by you and all back up copies made by you have
been destroyed.
7. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 4, 5, AND 6 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
8. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the second
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name of the person(s) who will represent that party and
the name of any other person who will accompany the representative(s). Within
twenty (20) days after delivery of the Response, the representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not
<PAGE> 4
more than fifteen (15) days. If the dispute, except as provided below, has not
been resolved by the negotiation procedure as provided herein within sixty (60)
days of the delivery date of the Dispute Notice, then the dispute shall be
settled by arbitration in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
hearing shall be held in Cuyahoga County, Ohio. A sole neutral arbitrator will
preside if the amount in controversy is less than One Hundred Thousand and
00/100 Dollars ($100,000.00) or by three independent and impartial arbitrators
if the amount in controversy exceeds One Hundred Thousand and 00/100 Dollars
($100,000.00). The arbitrator or arbitrators will be agreed upon between the
parties within three (3) weeks of the date upon which the arbitration is
initiated. If the parties cannot agree upon an arbitrator or arbitrators within
that time period, then, within three (3) weeks, the CPR Institute for Dispute
Resolution will be asked by the sender of the Dispute Notice to select an
arbitrator or arbitrators, and the arbitration will then take place within sixty
(60) days of the appointment of the arbitrator or arbitrators. The parties agree
to fully exchange all applicable documents and exhibits three (3) weeks prior to
the arbitration hearing and to limit discovery to two (2) depositions per party,
unless a deposition is necessary to perpetuate testimony of unavailable
witnesses, in which case there will be no limitation. Should either party fail
to participate in the Negotiations, the other party may initiate arbitration
before the expiration of the sixty (60) day period noted above. All judgments of
the arbitrator or arbitrators shall be final and binding and may be entered by
any court having jurisdiction thereof. Each party hereby waives any right to
punitive, exemplary or treble damages. The party which prevails in the
arbitration or any action, suit or other proceedings to enforce the covenants of
this Agreement or to obtain money damages for the breach thereof shall be
entitled to reimbursement from the other party for all expenses, including,
without limitation, reasonable attorneys fees and disbursements actually and
reasonably incurred.
10. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 4, 5 OR 6 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
<PAGE> 5
Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ Richard R. Russell
Name: Richard R. Russell
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ Fred Burke By: /s/ Jerry A. Cooper
Fred Burke Name: Jerry A. Cooper
Title: President / Chief Executive Officer
<PAGE> 6
ATTACHMENT A
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income to
facilitate the change in their lives resulting from termination from the Company
due to a Change of Control. This policy obligates the Company accordingly to
these executives subject to changes in applicable law and further actions of the
Board of Directors. The Board of Directors reserves the right, at its
discretion, to alter, amend or even terminate this policy, however, any such
change in the policy shall only take effect two (2) years after the date upon
which the Board of Directors institutes said change of the policy.
If an executive is terminated due to a Change of Control, the executive's base
salary (immediately before said termination), incentive bonuses (which bonuses
shall be the average of the incentive bonuses paid to the executive for the two
years preceding said termination), all insurance, medical benefits and company
car or car allowance (provided to the executive immediately prior to said
termination), will be continued for a period of two years from date of
termination, and all stock options outstanding will be immediately vested as
well as all contributions to the Defiance, Inc. Retirement Savings Plan (401(k)
Plan), the Defiance, Inc. Supplemental Executive Retirement Plan (SERP) and the
Defiance, Inc. Supplemental Savings and Deferred Compensation Plan (make-whole
SERP).
A "Change of Control" shall be deemed to have taken place if, as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets, contested
election, or any combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the first of any
such events to occur, shall cease to constitute a majority of the board of
directors of the Company or any parent or successor to the Company.
Termination due to a Change in Control is deemed to occur if, within two years
after the Change of Control, without the executive's written approval: (1) the
executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires that the
executive's principal place of work is more than twenty-five (25) miles from
the executive's principal place of work immediately prior to the Change of
Control or the executive is required to travel in connection with the
executive's employment to a greater degree than was customary during the year
prior to the Change of Control; or (5) there is a liquidation, dissolution,
consolidation or merger of the Company, or transfer or all or a significant
portion of its assets unless the successor(s) assume all the duties and
obligations to the executive set forth in this policy.
This policy updates and supersedes the Change of Control policy adopted by the
Board of Directors on September 22, 1994.
The key executives to whom this policy applies as of July 24, 1998 are as
follows:
Michael Meier - VP Finance and Chief Financial Officer, Defiance, Inc.
Cliff Schumacher - VP Marketing and Corporate Development, Defiance, Inc.
Benjamin Scherschel - President, Defiance Precision Products, Inc.
Fred Burke - President, Hy-Form Products, Inc. and Binderline
Draftline, Inc.
Michael Madden - President, Defiance Testing & Engineering Services, Inc.
